Market Equilibrating Process
Some consumers have changed how they shop as a result of the recession. Some cost-conscious consumers are turning away from buying premium organic foods. Organic foods have a reputation of being costly. As consumers true earnings decrease consumers cut back their spending to save money, and gain more with money they spend. The collapse in demand for organic foods demonstrate how market demand for goods with a high return, elasticity of demand is affected when the economy slumps. The sale of organic foods and other goods decreased in 2009 as manufacturers address challenges against a drop in consumer demand (Smithers, 2010).
According to the Organic Market Report 2010, organic sales fell from 2.1 billion to 1.84 billion in 2008; the information provides the most current study of the organic market, probing the presentation of dissimilar sectors. After many years of strong growth the sector of organic foods have a reversal of fortune. The demand for organic beef decreased by 30% and organic chicken was cut by 20%. Despite the organic sales slumps the director of the soil association is certain the organic market will overcome the decline, and resume growth.
A report from the Food Standards Agency reported organic food in comparison with traditionally produced foods has no significant difference in the nutritional substance. Furthermore, despite the decrease in sales of organic foods, the sales of organic foods are 50% more than five years ago.
The equilibrating process occurs when price and demand are equal. Presuming the price for organic foods is below the equilibrium price creates shortage in the quantity demanded and surpasses quantity supplied. The decline of sales in organic foods is a result of the equilibrating process of price and demands not equal.
McConnell, C.R., Brue, S.L., Flynn, S.M. Economics: Principles’, Problems and Policies. The McGraw-Hill Companies
Smithers, R. (2009) Organic...