The Cost Price For Coming Thanksgiving Day

On November 18, 2015, Forbes reported their prediction about turkey price for the coming Thanksgiving Day. According to their article, USDA reported that retailers cost price of turkey rose, while retailing price should fall. The cost price which retailers pay were rising from last year, and this is because of the outbreak of bird flu in this Spring. In this outbreak, 40 million chickens and 8 million turkeys were lost, and it was predicted to make shortage of turkey on Thanksgiving. Again, USDA reported the retailers’ cost price of turkey was $1.35 per a pound, up from $1.17 in last year, while the retail price consumers pay should be 87 cents per a pound, down from 93 cents in last year. There are two interesting points in this news. First one is that opposite price movements between cost prices and retail prices of turkeys,

According to the textbook, substitutability is one of determinant of price elasticity of demand. At normal time, turkey is elastic item because it doesn’t have strong necessity. Turkey is a kind of food, and food is necessary item. On the other hand, some kinds of food can be substitution of turkey. For example, chicken, beef, and pork can be it because they are also meat. Actually, coefficient of price elasticity of demand of beef is 1.27. If this value is above 1, it item is elastic. Therefore, turkey also must be elastic at normal time. However, on Thanksgiving Day, there is no substitutable item of turkey. Every family want to buy turkeys on this day. If the item is not substitutable, it is an inelastic item. For example, the coefficient of price of elasticity of eggs are .32 because eggs cannot be substituted by other items. Turkey’s coefficient also become less than 1 around Thanksgiving Day. And if the item is inelastic, retailers can make more profit per unit by increasing their retailing price. However, retailers choose to make it cheaper than last