Relative prices, consumer preferences, and the demand for food

Abstract

Shocks to world commodity prices and the depreciation of sterling led to a large increase in the price of food in the UK. It also resulted in large changes in the relative prices of different foods. We document these changes, and consider how they affected the composition of households' shopping baskets. We isolate the impact of changes in relative food prices from variation in preferences using data on purchasing decisions made by a representative panel of British households. We show that changes in relative food prices led to a worsening in the nutritional quality of households' shopping baskets, though this was partially mitigated by offsetting changes in preferences.