Sarah Diamond Yr12

IB Economics Internal assessment sample cover sheet

!
!
Candidate name

Candidate number

Teacher

Title of the article

Source of article

Date the article was published

Date the commentary was written

Word count (750 words maximum)

Section of the syllabus !

Please tick the one that is most
relevant
Section 1: Microeconomics
!
Section 2: Macroeconomics
!
Section 3: International economics
!
Section 4: Development economics

!
!
!
 Sarah Diamond Yr12

Frozen beefburger sales down 43% since

start of horsemeat scandal
Data also shows decline in frozen ready meals as Whitbread calls for
overhaul of how processed meat industry is regulated
Simon Neville
The Guardian, Tuesday 26 February 2013 20.04 GMT

!
!
Sales of frozen beefburgers have nose-dived since the Food Safety Authority in
Ireland made its horsemeat announcement. Photograph: Niall Carson/PA
Sales of frozen beefburgers have decreased by 43% since the start of the horsemeat
scandal as shoppers steer clear of products they fear might not be quite what they
claim on the label.

Data from market research firm Kantar Worldpanel shows sales of frozen ready
meals have also been hit, down 13% since the Food Safety Authority of Ireland said
in mid-January that it had found horsemeat in beefburgers destined for sale in
retailers including Tesco, Lidl and Aldi.

The figure also shows Tesco, which was one of the most affected after 100%
horsemeat was found in its own-brand lasagnes, suffered its worst monthly fall in
market share for at least 20 years in the four weeks to 17 February. Kantar said this
was more likely because of a reduction in big promotions compared with a year ago,
rather than shoppers staying away in protest against the scandal. However, retail
analysts at Barclays said Tesco "may indeed be suffereing a degree of consumer
backlash".

Edward Garner, director at Kantar, said: "There is still a huge rebuilding of trust for
retailers to do. We won't see a bounce back in frozen meat sales for a while, until this
has been resolved in the courts."

The supermarket chain Morrisons, which runs its own abattoirs, revealed last week it
had seen a boost in fresh meat sales. There have also been increases in organic
meat sales and independent butchers have also reported brisker business.

Riverford Organic Farms, which delivers fresh meat to customers homes, said it
sales in the past four weeks were up 41% on the same period last year.
 Sarah Diamond Yr12

Asda's chief executive, Andy Clarke, also revealed that his stores had seen a slight
increase in sales of meat-free dishes in the wake of the horsemeat scandal.

On Tuesday, the boss of Whitbread, Andy Harrison, criticised what he called Britain
and Europe's "piecemeal regulation and patchwork certification" for the processed
meat industry. The firm, which owns the Beefeater and Brewers Fayre pub chains,
has also been caught up in the horsemeat scandal. A lasagne supplied to Whitbread
by Brakes Brothers, and burgers from Doncaster-based Paragon Quality Foods were
found to have equine DNA.

Harrison said his pubs were putting burgers sourced from new suppliers in Ireland
back on the menu later this week, adding that Whitbread now had a system to
ensure processed meat products would be traced from "field to fork".
!
!
 Sarah Diamond Yr12

!
!
The article Frozen Beef burger Sales Down 43% Since Start of Horsemeat Scandal,
discusses how consumer tastes and preferences have been shifting due to traces of
horsemeat, ranging from 1% to 100%, found in supermarket products labeled as beef.
This has had a big effect on the demand, the quantity of a product that consumers are
willing and able to buy at a given price, for meat from various suppliers in the market.
!
Price () Graph showing demand for processed
meat

D Processed meat
1

D Processed meat
2

0
Q2 Q1

Quantity Demanded (kgs, meat)

!
After the press revealed the scandal, consumer preferences changed to locally sourced
meat as trust in supermarkets involved was lost. As a result, the demand curve for
processed meat (and ready-made meals, containing meat, sold for questionably low
prices) shifted to the left from D1 to D2. This caused quantity demanded to decrease at
example price P from Q1 to Q2 (kgs of meat).
!
 Sarah Diamond Yr12

D
Price ()
Graph showing inelastic PED

0 Q1

Quantity Demanded
(kgs, meat)

!
Price elasticity of demand (PED) is the responsiveness of demand to a change in price
for a good/service. If PED is perfectly inelastic, a change in price of the good will have
no effect on quantity demanded. It seems that, no matter how much supermarkets
lower the price of the processed meat, demand will not increase because consumer
trust has been completely lost. Processed meat could therefore have an almost
perfectly inelastic demand; this is shown as retailers are forced to take all the products
off their shelves to be disposed of. Germany even suggested that, since nothing can be
done to increase demand for the processed meat, it should be given away to the poor.
!
!
 Sarah Diamond Yr12

Price () Graph showing demand for fresh

meat

D Fresh meat
2

D Fresh meat
1

0 Q1 Q2

Quantity Demanded (kgs, meat)

!
!
According to the article sales of frozen beef burgers have decreased by 43% and
ready meals have also been hit, down 13%, these consumers must therefore find a
substitute, another good which, at least to part, fulfils the same needs of consumers
and therefore can be used to replace, in this instance, processed meat. The article
informs us that the main alternative has been fresh meat from local suppliers e.g.
butchers. This causes a shift to the right in the demand curve for fresh meat, as
quantity demanded at price P increases from Q1 to Q2 (kgs of meat). The article states
that for some local suppliers sales in the past four weeks were up 41%.
!
The substitution of an inferior good (frozen meat), a good that decreases in demand
when income increases, with a normal good (fresh meat), a good for which
consumption increases when income increases, has occurred. This substitution is
unusual since processed meat is much cheaper than fresh meat and there is no evidence
that consumers incomes have risen to allow the higher expenditure. Evidently,
consumers are willing to pay higher prices to ensure that their meat is safe and from a
trusted source.
Another, less likely, substitution of the contaminated meat could be vegetables, as
Asda claim increases in sales of meat-free products. If consumers cannot afford to
switch to more expensive fresh meat, or perhaps have been put off from eating all meat
after the scandal, they may decide to change their tastes and consume more/only
vegetables instead, increasing the quantity demanded for vegetables. However, these
suggested consequences of the scandal are based on assumptions that vegetables or
fresh meat are perfect substitutions for processed meat. Since the goods are replacing
ready meals, they cannot be perfect substitutes as they do not fulfil customers needs
for quick, low-priced food. As a result of this, the predicted outcomes of the
horsemeat scandal may not be entirely accurate.
 Sarah Diamond Yr12

!
!
!
Consequent to the scandal, the accused supermarkets suffered great reputational harm
involving consumer backlash threatening their market share, this could, however,
be argued to be only a short-term effect for producers.
In the long run, the changes in demand could be seen to reverse back to the original
state as consumers find that they cannot afford to consistently buy high value meat
from local retailers. As living costs increasingly rise, the public may eventually be
forced to return to buying the inferior goods, still however, weary of the meat they buy
and the prices that they buy it at. Some consumers, who arent willing to return to
purchasing processed meats, may continue buying from butchers. The extra
expenditure that is used for buying this meat may lead them to reduce expenditure on
another good. The promise of supermarkets to work particularly hard in testing
products thoroughly and tracing back along their supply chains from field to fork
may eventually reinstate consumer confidence, especially as the shock of the scandal
settles over time.