Fluid Milk Sales as Related to Demand Elasticities

Abstract

Summary Per capita consumption of fluid milk in the United States declined seven per cent between 1956 and 1962 or at a rate of more than one per cent a year. Therefore, a logical question is: What if anything can be done to reverse the downward trend in sales of milk? Would downward adjustments in retail price bring about an increase in per capita sales? A long-run study of 55 markets was made with price, income, and per cent non-whites as independent variables and per capita consumption of milk as the dependent variable. This study showed that in markets where the retail price was 20 cents per quart or over, the demand for milk was elastic, namely a decrease in price was accompanied by an increase in milk consumption greater than the proportionate decrease in price. Since the lowest retail price in three out of every four markets in the United States is over 20 cents, it is evident that a downward adjustment in price would be helpful to the dairy industry in increasing total milk consumption. Results of this long-run study are opposite those of 16 earlier short-run studies. Results of each of the earlier studies are summarized in this article.