– Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
A question was asked this week concerning beef supply and demand. From an economics perspective supply and demand are calculated based on quantity and price. The general public uses these terms a little more loosely and sometimes confuse demand with quantity demanded and the same on the supply side.
However, the beef market witnessed a strong surge in beef demand the past few years. Consumers proved they were willing to purchase more beef at higher prices, which is a clear indication of stronger demand. As the market heads into a time period of strong beef prices and a reduced supply due to environmental issues that caused a cattle herd size reduction, it is less certain if consumers will shift demand or if quantity demanded is the only thing that changes as price changes.
In simple, demand can stay the same even when consumers are purchasing less because prices increase. Thus, when prices increase, consumers tend to reduce the quantity demanded, but that does not mean demand decreased.