The elasticity of demand for UHT products

There is a difference of opinion among interested parties in the dairy sector about whether the demand for dairy products is elastic or inelastic.  Dr Koos Coetzee, the MPO economist, decided to attempt to quantify the demand for UHT milk in two periods in terms of the price elasticity of demand.

For this purpose, information on the market trends in terms of both sales volumes and prices for different dairy products obtained from Nielsen and published by Sampro (Sampro, 2017) and information on the monthly retail prices for a variety of dairy products obtained from BMI were used.

Based on the sales data supplied by Sampro and price data as reported by BMI the change in retail prices in both periods did not result in a similar or larger decrease in the quantity sold. Based on the total revenue rule, it can thus be concluded that the demand for UHT milk in the retail stores surveyed by Nielsen is inelastic. To read more, click HERE.

Published on Monday, 26th June 2017 - 09:54