Households make food choices based on numerous factors, such as taste, convenience, nutrition, and price. Lowincome households spend a larger share of their income

on food than do higher income households (Blisard and

Stewart, 2007); one might expect food stamp households,

therefore, to be especially influenced by price. If this is

the case, lowering the price of a healthful, but underconsumed, food or increasing the price of an overconsumed

food may be an effective strategy in improving the eating

habits of low-income households. Some proposed

changes to the Food Stamp Program are intended to

encourage healthful food choices by influencing the relative prices of foods. For example, a proposal to offer food

stamp participants a bonus based on the amount of fruits

and vegetables they purchase could be considered to

effectively lower the price of those foods (Guthrie et al.,

2007). What effects would such policies likely have on

the food choices of low-income households?

To answer this question, it is important to understand

how consumers respond to prices and whether lowincome households respond more strongly to prices than

other consumers do. ERS research on consumers’

response to food prices and how it affects their purchases

of particular foods can provide insights into the likely

effects of price interventions as a strategy to improve

food choices.

Response to Price Varies by Type of 

Food and Household Income

The availability of survey data on household food consumption and purchases has enabled ERS researchers to

examine the response of higher and lower income consumers to price. Using the 1987-88 Nationwide Food

Consumption Survey data, ERS researchers Huang and

Lin (2000) estimated household food demand by segmenting households into three income levels, with the

cutoff for the lowest income group the same as the food

stamp eligibility cutoff. They found that, in general,

household demand for dairy products, fruits, and vegetables was more responsive to price than demand for other

food categories. Low-income households were more

responsive to price changes than high-income households;

however, the differences were quite small. 

How Does Consumer Response 

to Price Affect Food Choices?

Would consumer response to price change be large

enough to make price manipulation an effective strategy

for changing food choices? If so, a policy intervention

that manipulated price by providing food stamp participants with a bonus or coupons for purchasing healthful

underconsumed foods, thus lowering their price to participants, might be effective in encouraging their consumption. Alternatively, an intervention that raised the price of

an overconsumed food might discourage its consumption.

Research conducted or supported by ERS has examined

consumers’ responses to price changes, and found that

the answer may vary, depending on the food chosen for

price manipulation. The following two examples illustrate this point.

Can Food Stamps Do More to Improve Food Choices? An Economic Perspective

How Do Low-Income Households

Respond to Food Prices?

Biing-Hwan Lin, Joanne F. Guthrie

United States

Department of

Agriculture

Economic 

Research

Service

Economic Information Bulletin Number 29-5 September 2007

Photo by Joseph Sanford
Example 1: Snack Foods

ERS researchers used supermarket sales data to investigate

the effect of raising the price of an overconsumed food category on consumers’ food purchases (Kuchler et al., 2004).

The category they chose was salty snacks, such as chips.

They found that consumer demand for these products is relatively unresponsive to price. That is, the percentage

decrease in the purchased quantity is less than the percentage increase in the price. Specifically, they concluded that a

10-percent rise in the price of potato chips (about 2 cents

per ounce) would decrease annual household purchases of

potato chips by 4.5 percent (7 ounces of 156 ounces). Consumers seem to enjoy salty snacks so much that raising

their prices by a small amount has little effect.

Example 2: Milk and Soft Drinks

There has been a populationwide shift in beverage consumption in America. Federal dietary guidance urges more

consumption of low-fat milk and less consumption of

sweetened beverages, such as soft drinks; however, the

reverse has taken place. Consumption of soft drinks has

soared, whereas milk consumption has declined (fig. 1).

The low cost of soft drinks, compared with other beverages,

such as milk, is often cited as a reason for these consumption shifts, and this trend in declining milk consumption

and rising soft drink consumption is indeed consistent with

the trend in relative prices (fig. 2). 

Data from the 1996-97 National Food Stamp Program Survey were used to investigate factors influencing beverage

purchases by food stamp participants, and price differences

in beverages were found to provide a partial explanation for

purchasing behavior (Yen at al., 2004). Study findings suggested that a 10-percent reduction in milk price would

result in a 14-percent increase in the consumption of

reduced-fat milk, and a 10-percent increase in soft drink

price would lead to an 8-percent reduction in soft drink

consumption. Nutrition knowledge and beliefs were also

found to be associated with beverage choice decisions. For

example, people who believed that it was important to get

adequate servings of milk tended to drink more milk, and

people who believed that it was important to moderate

sugar consumption tended to drink fewer soft drinks. 

The findings of these two studies, one on salty snacks and

one on milk and soft drinks, are consistent with the earlier

research by Huang and Lin on consumer response to food

prices. For some foods, consumer demand is not very price

sensitive, so small price manipulations may not induce

large responses in purchases—snack foods appear to fall in

this category. For other foods, such as milk, Huang and Lin

found demand to be more responsive to price. Consistent

with this finding, the case study of milk and soft drink 

purchasing found a much stronger effect of price on consumer demand for reduced-fat milk. These findings suggest

that price manipulation may have varying effects on food

purchases across different foods; it may influence consumption of particular categories, such as dairy, fruit, and vegetables, which appear to be most responsive to price change. 

How Much Can Price Change Affect 

Food Choices? Examining the Evidence 

for Fruits and Vegetables

For more than a decade, promotion of increased vegetable

and fruit consumption has been a major focus of Federal

dietary guidance. Nevertheless, Americans still do not consume recommended amounts of fruits and vegetables

(Casagrande et al., 2007). ERS-funded research indicates

that lower income consumers eat fewer fruits and vegetables than higher income consumers do. Recently, public

health advocates have suggested strategies for increasing

fruit and vegetable consumption of food stamp participants

that, through either a bonus or some other approach, would

effectively lower the price of these foods. To assess the

potential effectiveness of price intervention in improving

participants’ diets, we use the estimates of price responsiveness generated by Huang and Lin, as well as information on

current consumption compared with the recommended

level. For ease in demonstrating the effects of a discount, a

hypothetical 10-percent discount policy option is examined. 

ERS research indicates that a 10-percent discount in the

price of fruits and vegetables would increase the amount

purchased by 6-7 percent. Fruit and vegetable consumption

of the average food stamp participant is estimated at 1.95

2 Economic Research Service/USDA

0

10

20

30

40

50

60

Gallons per capita

1978 1982 1986 1990 1994 1998 2002

Milk

Carbonated soft drinks

In the past two decades, soft drink consumption 

soared, while milk consumption declined1

Figure 1

1

Food availability data is a proxy for per capita consumption over time.

Source: Economic Research Service/USDA, Food Availability (Per 

Capita) Data System, www.ers.usda.gov/data/foodconsumption/
cups per day. A 10-percent reduction in fruit and vegetable

prices, therefore, would raise consumption to an estimated

2.08 cups. A 20-percent reduction in price would raise consumption to about 2.2 cups—an improvement, although still

below the 3.5-5.0 cups per day recommended for typical

adults.

What would be the effect on program costs of adding such

a bonus to existing food stamp benefits? According to the

food spending data collected by the Bureau of Labor Statistics’ Consumer Expenditure Survey, households in the

poorest one-fifth of the population spent $208 per person

on fruits and vegetables in 2004. At that spending level, a

bonus of 10 cents per dollar spent on all fruits and vegetables would result in an additional $21 per person per year

(if the bonus was restricted to fresh produce, it would result

in $12 per person per year). Given a Food Stamp Program

caseload of 25.7 million participants, the annual cost of the

bonus can be roughly estimated to be be approximately

$0.5 billion if all fruits and vegetables were eligible for the

bonus and $0.3 billion if the bonus was restricted to fresh

produce. If the bonus were successful in increasing fruit

and vegetable consumption, program costs would rise,

although benefits could also be expected to be greater. New

research is underway at ERS to improve these estimates to

provide more information to policymakers.

Information Sources

Blisard, Noel, and Hayden Stewart. Food Spending in American

Households, 2003-04, Economic Information Bulletin No. EIB23, U.S. Department of Agriculture, Economic Research Service,

March 2007, available at:

http://www.ers.usda.gov/Publications/eib23/.

Casagrande, S.S., Y. Wang, C. Anderson, and T.L. Gary. “Have

Americans Increased Their Fruit and Vegetable Intake? The

Trends between 1988 and 2002,” American Journal of Preventive

Medicine 32(4):257-63, April 2007.

Fox, Mary Kay, and Nancy Cole. Nutrition and Health Characteristics of Low-Income Populations: Volume I, Food Stamp Program Participants and Nonparticipants, E-FAN-04-014-1, 

U.S. Department of Agriculture, Economic Research Service,

December 2004, available at: http://www.ers.usda.gov/

Publications/efan04014-1/. 

Guthrie, Joanne F., Elizabeth Frazao, Margaret Andrews, and

David Smallwood. “Improving Food Choices—Can Food Stamps

Do More?”Amber Waves 5(2):22-28, U.S. Department of Agriculture, Economic Research Service, April 2007, available at:

http://www.ers.usda.gov/AmberWaves/April07/Features/

Improving.htm.

Huang, Kuo S., and Biing-Hwan Lin. Estimation of Food Demand

and Nutrient Elasticities from Household Survey Data, Technical

Bulletin No. 1887, U.S. Department of Agriculture, Economic

Research Service, September 2000, available at:

http://www.ers.usda.gov/Publications/tb1887/.

Kuchler, Fred, Abebayehu Tegene, and J. Michael Harris. Taxing

Snack Foods: What to Expect for Diet and Tax Revenues, Agriculture Information Bulletin No. 747-08, U.S. Department of Agriculture, Economic Research Service, August 2004, available at:

http://www.ers.usda.gov/Publications/aib747/aib74708.pdf .

Yen, Steven T., Biing-Hwan Lin, David M. Smallwood, and 

Margaret Andrews. “Demand for Nonalcoholic Beverages: The

Case of Low-Income Households,” Agribusiness 20(3):309–21,

July 2004.

Economic Research Service/USDA 3

1978 1982 1986 1990 1994 1998 2002

0

20

40

60

80

100

120

140

160

180

Fresh whole milk

Carbonated drinks

Source: Bureau of Labor Statistics.

Consumer Price Index for carbonated soft drinks

and milk

Index: 1982-84=100

Figure 2
4 Economic Research Service/USDA

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