Gabe Hall
Mrs. Straub
AP Economics
9 November 2015
Gobble, Gobble
Thanksgiving- the act of giving thanks and of grateful acknowledgment of benefits or favors, especially to God- is celebrated every year. It is a time for family, and for love. But, for most of us, whether we admit it or not, the greatest part of Thanksgiving is the turkey. Whether you are a white meat or dark meat person, turkey has been a staple since Abraham Lincoln declared Thanksgiving a national holiday in 1863. Thus, it is interesting to study the economics of turkey as our holiday of thanks comes around.
Even though price increases seem to be a steady part of this coveted tradition, the average cost of the turkey has actually decreased throughout the past couple of years. According to the Columbus Dispatch, “at $1.58 a pound for a frozen bird at retail in September, the latest data available, turkey was 24 cents per pound cheaper than at the same time in 2013.” The drop in price of turkey is contrary to economic expectations. Thus, an analysis of the supply and demand of turkey must be conducted to determine the source of the price decrease.
As Thanksgiving weekend approaches, the demand for turkey increases as the tradition of the holiday influence shifts the demand curve. Thus a change in expectations of the family festivity. Also, the demand of turkeys is highly inelastic, as the quantity demanded does not respond at all to changes in the price. Consumers will buy the turkeys, for the most part, no matter the price, as it is such a standard, and dominant good of the holiday. Thus, the consumers do not have a great affect on the price of turkeys during the holiday season.
Like demand, there are many determinants of supply that contribute to shifts in the prices of a product at market. The major determinants in the change of price of turkey is the change in input prices and the changes in the prices of related goods. According to The Atlantic “falling fuel prices are dovetailing with a drop in corn and soybean prices (making turkey a bit cheaper).” Thus, the fall in price of the inputs to turkey feed contributes to a fall in price of the turkey at market. But the primary reason that turkeys are cheaper in November is because customers have come to expect it. They use the price of a turkey as a grocery store comparison for their holiday shopping. Many grocery stores sell their turkeys as a loss leader, to get people into the store to buy every other Thanksgiving good for their Thanksgiving meal at increased prices. (emarotta.com) This is why, overall the price of promotional turkeys are as low as 10% lower when Thanksgiving comes around. So, due to the increased price of other related products, and the relative inelasticity of demand, the price of turkeys will stay small for the upcoming Thanksgiving season.
Bibliography
Chandler, Adam. “The Economics Of Thanksgiving Dinner.” The Atlantic. Atlantic Media Company, 2014. Web. 9 Nov. 2015. <http://www.theatlantic.com/business/archive/2014/11/the-economics-of-thanksgiving-dinner/383046/>
“The Economics Of a Thanksgiving Turkey.” Marotta Wealth Management. Web. 9 Nov. 2015. <http://www.emarotta.com/the-economics-of-a-thanksgiving-turkey/>
This is a very interesting topic, I had not really considered the turkey industry and how its equilibrium price and quantities are affected by input prices and demand type. I assume that the price for turkey also has dropped due to the perfectly competitive nature of the turkey market, so even though consumers are willing to buy turkey regardless of the price, producers are unable to take advantage of this price in-elasticity because the product (turkey) is standard and produced by many firms, so consumers will buy the cheapest turkey available.
ReplyDeleteGabe, I thoroughly enjoyed how you incorporated the upcoming season into your blog post. I think it was very interesting how you analyzed the turkey market around thanksgiving because while it is strikingly obvious, I never seemed to think about it in this context. While most families do buy their turkeys earlier and for the lowest possible price, it is also interesting to think about the families who maybe burn the turkey during cooking or destroy it somehow and then have to purchase another one right before Thanksgiving. These last minute shoppers will pay just about any price for a turkey, and will probably buy the first one they find due to a low supply. I found it very intriguing how you analyzed the turkey market around Thanksgiving, great post.
ReplyDeleteThis was an interesting topic in regards to the upcoming holiday. I have to admit I had a few misconceptions about the topic, especially about the price. I figured that most suppliers would take advantage of the holiday and sell turkey at a higher price. Considering the inelastic demand of turkey during the holiday season this would be easy to get away with because consumers want a turkey for Thanksgiving and are willing to splurge if necessary. However, your analysis makes a lot of sense and I like the process you went through to analyze this market trend. Good job.
ReplyDeleteP.S. It's effects not affects
I have never thought about the turkey market around Thanksgiving before, so this post was very interesting in that sense. The turkey market, I believe, would be in or almost in perfect competition between producers. This could have played a vital role in the of turkey dropping as you stated in your post. But it also is true that around Thanksgiving turkey would be an inelastic good as it is the most important part of Thanksgiving, aside from the family. But in any other part of the year, turkey would probably be a pretty elastic due to its many similar types of goods -- chicken, pork, steak, etc. Overall I thought this post very enlightening and interesting and, aside from your misuse of affect, well written. Good Job!
ReplyDeleteI too never realized what suppliers would do to get customers into the store. I figured that turkey, being an inelastic good, would be sold at a higher price in order to increase revenue. I suppose the loss suppliers take through the decrease in the price of turkey would easily be made up through other holiday goods purchased at the store. It would be pretty rough if people only bought the turkey and went to a different store for the other foods.
ReplyDeleteI thought it was interesting that grocery stores will sell their turkeys at a loss to get consumers to buy all their thanksgiving groceries at that store. It seems like a good marketing technique. I think you did a really good job of analyzing why the price of turkey is lower due to supply and demand. I might add that throughout the year, the supply of turkey most likely falls due to a decreased demand in turkey. Also, some people might substitute turkey for ham or forgo turkey for vegetarian options. Although this is against tradition, I think this is becoming more common and it decreases the demand for turkey decreasing the price.
ReplyDeleteFor the most part, all turkey is the same. Thus, the firms in this market are dealing with perfect competition. When you said that a major contribution to turkey’s low costs was that competing firms try to offer lower prices than their competitors, you can see the principles of a perfectly competitive market at work. For this reason, any firm selling above the market equilibrium price will not sell any turkey, whereas firms selling below the equilibrium price can sell infinitely many. The principles of this type of industry are beneficial to us, as consumers, because it ensures reasonably low prices even though our demand for turkey during this holiday season is inelastic.
ReplyDeleteSince most every family buys turkey for a Thanksgiving meal, the demand increases greatly in November. You did a good job explaining some of the determinants of supply and why the price of turkey decreases around this time of year. I thought that producers would increase the price of turkey during this time of year since so many people will buy it no matter what, making it inelastic. I wonder what would happen if the suppliers made the price of a complementary good cheaper, such as mashed potatoes or stuffing, if they could get consumers to buy the turkey at a higher price. Great article!
ReplyDeleteThe idea that turkeys are sold at a cheaper price when Thanksgiving comes around goes against all rules of econ. Because of a change in consumer tastes, Thanksgiving, there would be an increase in demand of turkeys, and as demand increases so would the price. However, stores are becoming really competitive and lowering their prices to lure customers in. This is so people will want to buy all their Thanksgiving necessities at their store. If people will buy all their necessities and turkeys they will sell all their stock and not be left with a giant surplus that they can't sell.
ReplyDeleteIt always seemed to me that Turkey was a bit cheaper during Thanksgiving, but never really paid attention to its price after the fact. Especially with the following Christmas and New Years parties after Thanksgiving, stores want to draw in as many customers as they can afford to reap the benefits over the holiday season. Since turkey never changes in demand around Thanksgiving, its a good gimmick for stores to win over the consumers of competitors and increase their market share.
ReplyDeleteI never pay attention to the price of turkeys. But reading your article and how some stores use the turkeys to get customers into the store to buy other thanksgiving items . I always assumed that the prices of turkeys went up around thanksgiving. But the turkey industry though otherwise.
ReplyDeleteHonestly, I've never thought about the price of Turkey's. This is because we raise our own Turkey each year. Also I feel if it's wrong that the price of turkey's decreases when they are needed the most. I thought the paper was overall really good, and I did learn a lot about a topic not most people would write about.
ReplyDeleteI've never actually looked at the price for a turkey at any point in the year, but I did find this to be a very interesting topic. It is odd how the prices go against economic models since the demand for turkey is much higher around thanksgiving so people would be willing to pay more. I think this is where the idea of increasing the prices of other goods generally associated with Thanksgiving is a good sales tactic since most consumers would be looking for the best deal on a turkey and wouldn't want to go to a different store just to find cheaper prices for everything else.
ReplyDelete