Monday, September 17, 2007

The Price of Pasta

I really loved this article in the Sunday Washington Post about how rising wheat prices are causing an increase in the price of pasta and cookies, although with my love of starch I do not like the trend. Basically we can see the following happening. Corn prices are higher due to demand for ethanol, which causes some to substitute wheat for corn, causing higher cost of wheat, which in turn raises the cost of inputs to bakers and pasta makers, so now the price of pasta is rising. Hopefully my ECON 201 students will know, which way to shift the curves.

1 comment:

rjgitter said...

I was lecturing on supply and demand in class and discussed the impact of the increase in the price of corn. I noted that corn is an input (literally to cows) in milk production. The increase in the price of corn has resulted in an increase in the price of milk.

But what I did not discuss is why there has been almost no increase in the price of beef over the last year. Why is that the case? Are cattle ranchers bringing more cows to market now to avoid paying more to raise the cows later? If so, the price of beef will rise later, but why has it not yet gone up?

Bob Gitter/Dad