Food Economics Glossary
Plain-language definitions of food pricing, inflation, and economics terms, explained through the lens of what your cheeseburger costs. 25 terms and counting.
Economics
Big Mac IndexAn informal measure of purchasing power parity invented by The Economist in 1986, comparing the price of a McDonald's Big Mac across countries to assess whether currencies are correctly valued.Consumer Price Index (CPI)A measure of the average change in prices paid by urban consumers for a fixed basket of goods and services, published monthly by the Bureau of Labor Statistics.Cost of LivingThe amount of money needed to maintain a particular standard of living in a given location, including housing, food, transportation, healthcare, and taxes.Purchasing Power Parity (PPP)An economic theory that compares currencies by measuring how much a standardized basket of goods costs in different countries, revealing whether currencies are over- or undervalued.Substitution EffectThe tendency of consumers to switch from a product that has become more expensive to a cheaper alternative that serves a similar purpose.
Pricing & Markets
Farm-to-Table MarkupThe difference between what a farmer receives for raw agricultural products and what consumers pay at retail, food typically costs 3-5x at the grocery store what the farmer was paid.Fast Food PricingThe pricing strategies used by quick-service restaurant chains, where raw food costs typically represent only 25-35% of the menu price, with the rest covering labor, rent, and profit.Food Price ElasticityA measure of how much consumer demand for a food product changes in response to a change in its price, inelastic items (like ground beef) see little demand change, while elastic items see large shifts.Input CostsThe costs of raw materials, labor, energy, and other resources that go into producing a finished product, rising input costs are a primary driver of food price inflation.Regional Price DifferencesSystematic variations in food prices across U.S. geographic regions, driven by proximity to production, local labor costs, transportation logistics, and competition among retailers.
Food Industry
Commodity PricesThe wholesale prices of raw agricultural products like cattle, corn, wheat, and dairy on commodity exchanges, these upstream prices eventually flow through to retail food costs.Food at Home vs. Food Away from HomeThe BLS classification dividing all food spending into groceries and cooking ingredients (food at home) versus restaurants, fast food, and takeout (food away from home).Food Supply ChainThe network of farms, processors, distributors, and retailers that moves food from production to the consumer's plate, typically spanning 1,500+ miles for the average American meal.Grocery vs. Restaurant CostsThe price comparison between cooking food at home with grocery ingredients and purchasing equivalent meals from restaurants, home cooking is typically 3-5x cheaper per serving.
Inflation & Trends
Food InflationThe rate at which food prices increase over time, measured as a percentage change in the food component of the CPI, historically averaging 2-3% annually but spiking to 11.4% in 2022.GreedflationA theory that part of recent food price increases are driven by corporations widening profit margins under the cover of inflation, rather than solely by increased input costs.Real vs. Nominal PricesNominal prices are the actual dollar amount you pay today; real prices are adjusted for inflation to compare purchasing power across different time periods.Seasonal Price VariationThe predictable pattern of food prices rising and falling with growing seasons, harvest cycles, and consumer demand patterns throughout the year.ShrinkflationThe practice of reducing the size or quantity of a product while keeping the same price, effectively raising the per-unit cost without an visible price increase on the shelf.
Data & Measurement
Basket of GoodsA fixed set of consumer products and services used to measure price changes over time, the CPI basket contains about 80,000 items, while the Burgernomics uses a basket of 5 burger ingredients.BLS Average Price DataA BLS program that reports actual dollar prices (not index values) for approximately 70 food items at the national and regional level, published monthly, the primary data source for the Burgernomics.Producer Price Index (PPI)A BLS measure of the average change in selling prices received by domestic producers for their output, a leading indicator that signals future changes in consumer prices.USDA Food Price OutlookMonthly forecasts from the USDA Economic Research Service predicting food price changes for the current and next year, based on commodity market analysis and econometric modeling.
Consumer Impact
Food Expenditure ShareThe percentage of household income or total spending devoted to food, lower-income Americans spend roughly 30-35% of income on food versus 8-10% for higher-income households.Wage-to-Burger RatioThe number of minutes a worker earning the median or minimum wage must work to afford a homemade cheeseburger, a practical measure of food affordability that accounts for both price and income changes.