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Man’s Best Friend Meets Shoppers’ Worst Enemy: Pet Food Inflation

EconEye Admin

Americans paid 15% more for pet food in February than they did a year ago. In 2022, more than 110 million U.S. households spent an average of $680 on pet products—an 11% rise over 2021.—usatoday.com

Answer the following questions to check your understanding of the story.

What does the news clip tell us about the demand for pet products, if the price of all pet products experienced a price change similar to that of pet food in the last year?

The demand for pet products is _____________.

Wrong! - If the price of pet products rises more than 15 percent, and expenditure on pet products increases 11 percent, what is the change in the quantity of pet products purchased? What does that tells us about the price elasticity of demand?

Well Done! - The demand for pet products is price inelastic because when the price of pet products rises more than 15 percent, expenditure on pet products increases.

Using the information in the news clip, what is the price elasticity of demand for pet products?

Wrong! - Total expenditure equals the quantity purchased multiplied by the price, so the change in total expenditure equals the change in the quantity purchased plus the change in the price. Total expenditure on pet products increased 11 percent when the price rose by 15 percent. By how much did the quantity purchased change? How do you use this information to find the price elasticity of demand?

Correct! - Total expenditure equals the quantity purchased multiplied by the price, so the change in total expenditure equals the change in the quantity purchased plus the change in the price. Total expenditure on pet products increased 11 percent when the price rose by 15 percent, so the quantity purchased decreased by 4 percent. The price elasticity of demand equals the percentage change in quantity demanded divided by the percentage change in price, which is 4 percent/15 percent = 0.27

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