Thanksgiving means more demand for turkeys. And yet supermarkets discount the price. Why?
First some turkey facts. This year, the American Farm Bureau says that the price of a typical turkey is up 22% from last year. According to Slate, the price of the typical supermarket frozen turkey has been increasing since the 2007 recession began.
One culprit is corn. As this turkey farmer said, “Any time corn prices jump, our costs go up a lot.” Revenue may be record setting but not profits.
But still, knowing the once a year turkey buyer is price-sensitive, your local supermarket will probably charge 10% less than its October price. Similarly, during Lent, food stores discount tuna. And people pay less for beer during the 4th of July weekend.
Finally, priced from $75 to $100 and more, here is a turkey for which buyers are not price sensitive.
The Economic Lesson
Knowing that the Thanksgiving turkey customer is price sensitive, food stores charge less. But, they make their money on relatively expensive complementary goods like sweet potatoes and cranberries and cream of mushroom soup.
Looking at a graph, you would see the demand for turkeys rise. As a result, the demand curve for a complement would also shift to the right.
An Economic Question: On a supply and demand graph, how would you illustrate the increase in typical Thanksgiving supermarket turkey prices?
Posted by: adminEcon
Tags: corn, demand, supply, Thanksgiving, turkey
The bald eagle is our national bird but, according to Ben Franklin, the turkey should have been. In a letter to his daughter, he explains why.
“True original natives,” turkeys are American birds. “…Though a little vain and silly, [the turkey is] a bird of courage…” that does the right thing…” By contrast, the bald eagle has “bad moral character…[and] looks “flashy” but steals instead of working hard for his food.”
In a wonderful New Yorker article, discussing Franklin’s letter, Adam Gopnik explains how the turkey relates to hard work, honesty, respect for education and all that we need for a healthy economy. He even connects the bird to globalization through the turkey curry and tacos that we make with our Thanksgiving leftovers.
I recommend looking at the original Franklin letter. You can get a good picture of his insight.
The Economic Lesson
The turkey also takes us to food inflation. At $49.20, a Thanksgiving dinner for 10 will cost us 13% more than last year. The biggest increase? The price of a turkey went up 22%.
By contrast, the CPI, from December to December rose 3.5%. For food, it was up 4.7%.
An Economic Question: Thinking of rising commodity prices, draw a supply/demand graph showing why turkeys are more expensive.