tutor2u | US farmers go natural for profits

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US farmers go natural for profits

Graham Watson

19th September 2016

Some elementary microeconomics here: certain farmers in the US are promoting the sale of 'natural' (i.e. hormone free) meat. This means that they've reduced the head of cattle they farm but are still able to make a profit. It's clear why this is the case: there's a demand for 'organic' foodstuffs in the developed world and it's likely to be a luxury good and have a more price inelastic demand curve.

Final year economists should be able to identify two reasons why this is the case - think in terms of consumer incomes and the attitudes of organic consumers. If this is the case, then the premium price they are able to charge more than offsets the fact that the cattle are 5% more expensive to rear.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to Tutor2U, reads voraciously and is interested in all aspects of Teaching and Learning.

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