The Economy and Food

After reading a fellow classmate's post on the current American economic situation, I was motivated to look a bit more into it for myself. I stumbled across an interesting article that put a certain component of economics in an easier way to understand. It wasn't talking about the stock market, but it was talking about our economy's situation having an affect on the prices of food.

In the article, "Falling oil prices? Food won't necessarily follow," they use the term "sticky" prices to describe how prices on goods are rising and staying high, "although the rationale for the price hikes--such as soaring oil prices-- is gone." To me, this definitely seems like the food industry is trying to take advantage of the consumer to get ahead of their losses. However in the article it is stated that the only thing that usually can lower a price hike is demand decreasing on the item, and a substantial demand decrease is not likely. According to Lars Perner, assistant professor of marketing at the University of Southern California's Marshall School of Business, "Companies also tend to price their products based on what their competitors are charging and not necessarily on what it costs to make them." I find this very interesting, because it seems almost if the companies making certain products aren't even looking at America's economy when trying to find a price point that is ideal for their product that both appeals to the consumer and reaps a benefit for the producer.

This leaves me thinking what the relation even is between food prices and the economy right now. What do you think? I am finding it to be a puzzling situation.

CNN.com/US
Falling oil prices? Food won't necessarily follow
http://edition.cnn.com/2008/US/10/19/sticky.prices.ap/index.html