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Price elasticity of the demand for plant-based milk in the middle atlantic division

Price elasticity of the demand for plant-based milk in the middle atlantic division

Samenvatting

Both plant-based and dairy milk has been a deeply integrated nutrient source for cultures across the world. Although dairy milk provides essential nutritious value, plant-based milk could serve as a nutrient, more environmentally friendly, and fewer saturated fat containing substitute to dairy milk. Basic economic principles indicate that demand would increase if prices of plant-based milk reduce. Price elasticity of demand estimates could help to quantify the potential effects of pricing policy to promote plant-based milk as a substitute for dairy milk. As a result, the objective was to identify the price elasticity of demand for plant-based milk beverages to predict the impact of pricing policies to improve public health and diets in the US Middle Atlantic division. In this study, quantitative data analysis was conducted using consumer expenditure, and Nielsen point-of-sale and consumer panel data. A Linear Approximation of the Almost Ideal Demand System was utilized to derive own and cross-price elasticities of 7 milk categories, namely dairy, almond, soy, coconut, rice, blends, and oat milk, where after appropriate cross-price elasticity values were used to predict the effect of a sales tax extension on public health. In all, the results indicated that milk demand is elastic, which suggests that an increase in milk beverage prices could lead to increases in the demand for other goods. In specific, the own-price elasticities of the various milk categories were estimated to be between -1.53 and -3.19. In addition, the cross-price elasticity estimates implied that plant-based milk behaves as substitutes for dairy milk. In accordance with these findings, the estimated effects of an extension of sales tax to dairy milk beverages on public health were calculated, which were estimated to be modest, as some health benefits were partly offset by unintended effects. In conclusion, the impact of price elasticity of demand for plant-based milk on public health in the United States Middle Atlantic division is inadequate to justify a sales extension on dairy milk. In the short term, governmental institutions could utilize the estimated own and cross-price elasticity values in this study to evaluate and potentially redesign existing policies. In the long-term, governments should carefully study unintended cross-elasticity effects and changes across a range of nutrients associated with a dairy milk tax. In a like matter, governmental institutions should explore how other interventions, that have proven to be effective to prevent and reduce health risks, could complement a sales tax extension.

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OrganisatieAeres Hogeschool
AfdelingBedrijfskunde en Agribusiness
PartnersAeres University of Applied Sciences Dronten
Datum2020-08-10
TypeBachelor
TaalEngels

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