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Lecture 5

ECN 340 Lecture 5: Fat Economics

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Ryerson University
ECN 340
Thomas Barbeiro

Fat Economics Introduction Why do so many overweight people can eat high calorie items such as pecan rolls? Over the last 50 years there has been a worldwide weight gain problem Excess weight has been associated with at least 35 diseases (diabetes, heart) The overweight problem has led for a demand for larger cars, this more gasoline and jet fuel (due to heavier passengers) We will see that main issue is that the full price of fast food is lower than the price at which one could make the same food at home Many lay the blame for obesity on peoples loss of control or businesses greed to make profits. But these explanations dont stand up to scrutiny While obesity and weight problems is particularly acute in the US it also a major problem in Canada Relative Price of food Since 1950s people income has risen faster than prices. Real income is higher than it was 60 years ago Food prices have risen but not as much as other prices this a relative bargain What do we know about demand curve? Food prices have moved in tandem with other prices (CPI) but relative to other prices food prices have fallen particularly between 19702000 The widespread weight gain can be at least partially attributed to drop in the relative price of food Relative food prices rose after 2000 and obesity slowed Some researchers found that lower relative food prices accounted for 55 in the rise of the average BMI (Body mass index) Drop in the relative price of food takes time to translate into higher BMI Study of 4600 students form 0609 showed rise in rate of obesity slowed. Food prices generally rose particularly corn which use to produce ethanol used to mix in gasoline, leading to a rise in the price corn. Corn and its byproducts used in many food products Increase in global demand for food products (particularly in China and India due to rising incomes) has contributed to the relative food price increase after the year 2000 Note: IN US states with higher taxes on food have lower obesity rate Rise of healthy food prices compared to unhealthy foods appears to have contributed little to weight gain according to research as one would expect Perhaps it will over long run We should be looking at full prices Price of preparing unhealthy probably have fallen more than the time required to prepare healthy foods
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