1/28/2005

Is Our Food Storage's Hiking Up Food Prices?

For longer than I have been alive, there has been an issuing for people to get some sort of food storage in case of an emergency. I am not saying that it is not a good idea to have food storage; it’s just that some people that store food might not ever be able to use it in some cases of disaster. Let’s look at a perfect example, St. George, Utah. Flood victims lost more than just personal items; some lost their food storage.

Buying goods is a normal action people interact with day-by-day. The demand of a good becomes sensitive when people buy a lot of that particular good. So, if people only bought what they needed instead of buying more, would the elastic price of a popular item become less sensitive from lack of demand?

In my personal opinion, the buying power people have today will only become better. In other words just because people may buy a lot of one particular good, does not mean stores will increase the price to make a higher profit. When I say that our buying power will only become better, I mean that through technology we [the world] will find new ways to produce goods at a faster rate and less expensive for the consumer. The more we as consumers buy, the more the world will produce, and the more we will help the economy as a whole.

4 comments:

Rex said...

As the demand for a product increases, the price will naturally decrease. I think you can liken it to computers, that is, ten years ago the price of a personal computer was much higher than it is today. Of course, as with computers getting quicker and having more memory, products tend to get better and better as they are produced. So do I think that food storage will increase the price of some items at the supermarket? No, but as there is more need for these items someone, somewhere; will find a way to produce them quicker and at a lower cost.

Jones said...

As a new resident of Utah, I thought the way people stored food here was a little odd when I first moved. I guess you can never be too prepared, but the pantries here are huge! Plus a good percentage of the natural disasters would probably wipe out our food storages before we got to them anyways. I doubt our food storage would have anything to do with increasing food prices. Sure if the demand for one item increased so would the price, but not everyone stores the same food items. Also, not everyone buys the food for storage at the same time. People buy it randomly. Maybe if word spread that a lethal tornado was heading our way in a week products bought for safety precautions would rise. But until our weather shifts and we have to worry about tornados I don't think that the rise of food prices because of storage is too much of a concern.

Drake said...

I don't believe that food storage will ever hike up the price of food prices. On the other hand,when disater strikes and noone can get food from the grocery store, food storage could definately raise the price of food. Supply and demand has taught us this. But for normal everyday scenarios to me it seems impossible.

Dr. Tufte said...

-1 for a spelling error in Drake's comment (waived)

I don't think food storage is related to prices. The reason is something called arbitrage. Yes, higher demand in Utah will force up prices here. But that is only part of the story. That higher price is a signal for suppliers in other states to ship food here. That process stops when the signal disappears. That happens when the prices have been equalized.

Food storage is an idea whose time has probably passed. This is a form of insurance that is worthwhile when other forms of insurance with lower transactions costs are not available. That hasn't been the case for 50-75 years.