Muscovite Yana Repina gave up sushi dinners and cut down on salmon and brie so she could afford to give her cat Busya its preferred variety of Nestle SA pet food. “I’ve tried to buy cheaper brands, but she refused to eat those,” said 34-year-old Repina. Her cat devours a can of Nestle’s Purina Gourmet a day, costing Yana about 50 rubles ($1.17), three times the price of the low-cost Friskies label, which she says her pet won’t eat. Even in Russia, where the economy contracted a record 10.9 percent in the second quarter, consumers find it harder to cut spending on pets than on themselves and their families. Nestle’s nine-month sales of petcare products rose at more than twice the rate of overall food and beverage revenue.
According to Euromonitor, the value of dog and cat food sold in North America will have risen 5.2 percent a year on average from 2004 to 2009, double the rate of packaged foods for humans such as rice and yogurt. Pet food sales will probably gain 2.5 percent on average each year through 2014, the market researcher forecasts, compared with 1.1 percent for packaged food. Consumers’ reluctance to cut spending on their pets enabled Nestle to increase prices by more than any product.
Wow! I think that's CRAZY! What does this article imply about the price elasticity of pet food? How do you know? Economically justify your claim. What does this article imply about the income elasticity of pet food? How do you know? Economically justify your claim.
