OA Group 2 by Lydia Ashton

Introduction

lydiaashton1 — 2024-10-11 21:33:26 UTC

The article, "Is Fast Food Cheaper Than Eating At Home" by Aja McClanahan published on September 20th 2024 discusses the argument between eating at home vs. eating out. Although it has been a common belief that eating at home makes more economic sense, recently there has been more of an argument. There is much more than costs when taking into account what makes more sense. Often times eating out can be more time efficient over making something at home. While often times, cooking at home can save the most money, it can be true that sometimes eating at a drive-through can be more cost effective and time saving. The example that they discussed in the article was how making a chicken sandwich at home would be more expensive than getting one from a restaurant like Wendy's or McDonalds. For this reason it is hard to make a definitive answer on just one. On the other hand, cooking at home leads to leftovers which can provide more than one meal. It also depends on what and where you are ordering. In this example, the author discussed how going to a steakhouse, you may be upcharged up to 300%. For this reason, it would make much more sense to make it at home. Overall, eating at home is often more cost effective. There are some other factors that come into play, including family size, allergies or diet concerns and cost of ingredients. While either way costs can add up, the article also mentions ways to cut down on costs. This includes going to Costco and buying in bulk or optimizing the freezer in ones home. While it could still be up for debate, overall, eating at home may be the best option.

Equilibrium Model

lydiaashton1 — 2024-10-11 21:33:26 UTC

Above is a graphic that demonstrates the application of the equilibrium model to analyze the cost of fast food vs home cooked. This shows that convenience and markup costs for the fast food side is not good for savings and health, where on the other side, home cooked meals are less expensive and have less of a markup despite not being as quick. With the convenience cooking at home aligns with the model's prediction of lower overall costs when considering bulk purchases. This was my analysis on the topic, but I would love to learn more!

Economic Relevance

lydiaashton1 — 2024-10-11 21:33:26 UTC

Perhaps the most obvious of the economic principals that is relevant in this example is opportunity cost. The opportunity cost would be what you give up in order to get something else. In this case that would be what you would give up, home cooked meal, in return for eating out. The opportunity cost of making something at home could be losing time that could be spent on something else, rather than cooking. Another important factor that comes into play would be gains from trade. This is because it may be beneficial to spend you time doing something else rather than cooking. Although cooking at home may be arguably cheaper, it is also usually more time consuming than going through a drive-through. If time is a more valuable commodity than money, it could be seen as more beneficial to purchase food. Another factor to consider could be externalities. While this may not be an obvious problem if not much thought is put into it, there are several negative impacts that could come from eating out. One of these problems could be excess waste that could be transmitted into the environment. This would contribute to the problem talked about in class of landfills and how they are piling up as a result of so much cardboard and plastics being used. Another externality that could be caused by eating out too frequently would be negative health affects. Because often times drive-throughs are not the healthiest foods, eating it too often could lead to negative effects on the consumers health.

lydiaashton1 — 2024-10-11 21:33:26 UTC

Real World Example

lrward2_1 — 2024-10-25 18:00:54 UTC

As we are seeing today in a post Covid world that the price of many things have increased. Grocery prices, especially things including poultry, eggs, and most fresh produce, have increased significantly. According to the US Bureau of Labor Statistics, in September of this year, the food index increased 0.4%. They also stated that five of the six major grocery store food group indexes increased during this period. The price index for meats, poultry, fish and eggs rose 0.8% in September alone. All of these statistics are examples of how groceries have become increasingly more expensive just within the past couple months alone. For this reason, some people may be more prone to eating fast food, thinking that it is the more economically sound option. While they prices for food have increased at grocery stores, the price of eating out has also increased. According to the Bureau of Labor Statistics the index for eating out has increased 3.9% within the last year. For this reason while it may seem like eating out is a better option with the recent inflation, this may not always be the case.

Citation:

U.S. Bureau of Labor Statistics. (2024, October 10). Consumer price index summary - 2024 M09 results. U.S. Bureau of Labor Statistics. https://www.bls.gov/news.release/cpi.nr0.htm

Comparative Analysis

lrward2_1 — 2024-10-25 18:10:21 UTC

While food prices have been increasing this year because of inflation, this is not the first time that this has happened. According to the US Department of State, during the 2008 recession there a drastic price increases for groceries. The International Food Policy Research Institute (IFPRI) reported that from January 2004 to May 2008, rice prices increased 224%, wheat prices increased 108%, and corn was up 89%. This caused food insecurity for much of the world. This is much more extreme than what we are seeing today, however, even a small increase in the price of food affects families quite a bit. One thing that worked in 2008 was IFPRI concluded in their report Reflections on the Global Food Crisis that “three-quarters of the increase in the price of rice occurred in 2008—almost certainly because of adverse policy responses, such as export bans, from some major exporters.” This means that some of the export restrictions in producer countries could have been a main cause of panic buying by major importers, which in turn caused an increase in world prices. While this may not be what is going on now, it would be interesting to compare in more depth what exactly is causing the higher prices now vs. in 2008 and see the different ways to combat these higher prices.

citation:

Food prices crisis of 2007-2008: Lessons learned. U.S Department of State. (2011). https://2009-2017.state.gov/r/pa/prs/ps/2011/03/157629.htm

Market Failures and Unintended Consequences

lrward2_1 — 2024-10-25 19:44:03 UTC

One thing that provides unintended consequences of going out to eat would be the negative externality of eating unhealthy food and effects of that on your body. Another negative externality would be the extra waste that it would produce. With this being said, it could also be argued that buying from the grocery store would provide a good amount of waste from the packaging they provide. This is a market failure because of the negative externalities that eating out provides. This failure occurs due to the fact individual consumers may not fully consider some of the broader social costs of their choices, which can lead to overconsumption of unhealthy options and excessive waste, ultimately leading to impacts on society as a whole.

Challenging the Equilibrium Model

lrward2_1 — 2024-10-25 19:57:44 UTC

These factors would challenge the predictions of the standard equilibrium model because the consumers are not making rational decisions that consider things including externalities. If they were following the equilibrium model they would make a full decision based on all the information about both eating out and eating in. Another factor that challenges the equilibrium model would be that prices would reflect the true costs of good, but in this case the fast food is a very low cost and may not reflect the true price. This may cause consumers to thing that it is most cost efficient to eat out rather than eat in.

Unintended Consequences, Externalities and Reasons Market Equilibrium is not Applicable

lrward2_1 — 2024-10-25 20:05:07 UTC

The interplay of negative externalities, market power and imperfect information show us the limitations of the standard market equilibrium model in this real-world scenario. As mentioned previously, the negative externalities may be waste or unhealthy eating habits. Market power could be something like fast food restaurants pricing their food at a lower cost to incentivize consumers to make unhealthy choices. An example of imperfect information could be a lack of knowledge about the food and how unhealthy it may be. It could also be a lack of knowledge about future health risks. Another thing that could be considered imperfect information could be not knowing that eating in is actually more cost effective and healthier. Addressing such issues through things like policy interventions, education, and incentivizing healthier and more environmentally sustainable choices could help people make overall better decisions.

Conclusion

lrward2_1 — 2024-10-26 00:36:25 UTC

Some of the positive analysis to eating out vs. cooking at home is the cost comparison. Studies have shown that cooking at home typically can costs less per meal than eating out. This is especially true for larger portions. Cooking at home can also offer more nutritional option in comparison to going to a fast food joint. Another positive analysis would be time efficiency. If ones needs to allocate their time in other ways, eating out may be a better option. Making something at home can be time consuming, whereas, drive-throughs may provide a quick and easy meal. A normative value could be the environmental impact. Home cooking may be viewed as a bit more sustainable, which in turn may reduce waste. Overall, while home cooking may be more economically smart as a whole and can provide more health conscious options, it is important to consider time as well as resources when saying which is better. Although there may be more benefits to home cooking, everything in moderation!