INTERESTING to see a supermarket cutting prices across a range of everyday necessities, including milk, bread and butter (Business, 8 June).
There was a time when textbook economics gave these items as an example of “price inelasticity”. Demand didn’t respond all that much to “cut-pricing” as consumers didn’t increase their total consumption. Won’t revenue from these items fall if the volume of sales doesn’t increase more than proportionately?
Unless, of course, the items to be cut, such as milk, bread and butter, are supplied cheaper.
Hopefully supermarket price wars won’t mean that suppliers, like dairy farmers, will face even more problems.
Old Chapel Walk