How Price Affects Avocado Eaters

There is considerable evidence that we have what Bloomberg calls an “avocado addiction.” In Brooklyn, you can eat at Avocaderia, the world’s first avocado bar (according to their website). The Food Network has a recipe for avocado pie. And Square reports that their customers have spent nearly $1 million a month on avocado toast.

Then though, avocado prices surged:

And here is where it gets interesting.

Avocado Eaters

The Price Rise

When the avocado become more expensive, we ate much less. Yes, the law of demand says price up, quantity demanded down. But with avocados, the response appears to have been big:

The Price Fall

But now, as quickly as avocado prices rose, they plunged. Better weather and improved pest control had increased supply. And you know that when our supply curve shifts to the right, price drops:

And when price drops, we are willing and able to buy more. But how much more?

Our Bottom Line: Elasticity

Like a rubber band, price elasticity of demand measures how much the quantity we demand stretches when there is a price change. A large reaction to price from quantity means our demand is elastic. Little response indicates inelasticity. For most of us, our demand in New Jersey for winter strawberries is elastic when price soars. However, when price goes up for some medicine that we need to take, we display inelastic demand because we  keep buying it.

Quantitatively, that means we are comparing the percent change in price to the percent change in quantity. If that price percent change is more than the percent change in quantity, we have inelasticity. When the proportion reverses, our demand is elastic.

With avocados, we do not have the precise data to confirm the percent changes. But, speaking more generally, we can say our demand is elastic.

And we can assume that with lower prices, we are going to be eating many more avocados…and guacamole.

My sources and more: The avocado price saga was fascinating to follow in Bloomberg. But when I discovered the elasticity data, it became so much more interesting.