High Egg Prices Lead to Accusations of Market Power: Unscrambling the Economics
The American Action Forum cites ICLE Chief Economist Brian Albrecht in this new piece on rising egg prices. Read full piece here.
Economist Brian Albrecht – who posted a blog discussing Bedoya’s claims – offered an economic rationale for why even a small change in egg production could yield such a large change in price. Albrecht concluded that the “size of the price change depends on both supply AND demand elasticities, which are about how easily the quantity supplied and quantity demanded respond to price changes.” Citing a previous estimate of supply and demand elasticities from the last episode of avian flu, Albrecht explained that “egg demand elasticity is -0.15, meaning a 1% increase in price only reduces quantity demand by 0.15%. Put differently, if the quantity supplied drops by 1%, prices will rise by about 6.67%.” In other words, the quantity demanded for eggs is not sensitive to price increases.