People’s budget, income, and substitution effects are connected in demand theory. If the price of some product (beef, for example) is growing, and income (budges) stay on the same level, people start to substitute this product with another (cheaper). These actions are called substitution effects. In case of beef, such a substitution products could be pork, poultry, etc. Substitution effect is one of the core principles of behavioral economics (Hursh, p. 435). People always react to any economic changes, and the most common reaction to changes in prices is changes in budget dispersion. With the same level of income, people try to maximize the level of utility. So, as they have their need on the same level, they start to substitute more expensive products with cheaper ones in order to meet their needs.
On my opinion, it would not have a huge effect on demand curve of indoor grill products. Grills are complemented products to beef, so, from economic point of view, the demand curve for grills should be shifted to the left (reduce the level of demand). But on the other hand, indoor grills could be used not only with beef, but with any kind of meat, poultry, or fish. If the consumption of meat products will not change (with the only changes between meat kinds), the demand on indoor grills should be not changed as well.
As for George Foreman role in indoor grills sales, it will totally shift the demand curve into right. Of course, the marginal utility of grills are not increasing (there are no any changes in products), but the perception of these products are changed totally. The usage of celebrity in marketing campaigns is not a new trick, but it so efficient in almost all cases, so it stays so popular even nowadays.
Of course, increasing demand on any products after usage of celebrity in marketing campaign is not rational. But this is a bright example of behavioral economics. People not always do rational. They don’t use principle of marginal utility (or any other theoretical instrument). Increasing sales of indoor grills after appearance of George Foreman as a face of the products show as the nature of human irrationality (he is a former boxer, not even a cook). But because of his fame and popularity, indoors grills started to sell much better. People see famous people that advice to buy them something, and they start to believe that this goods are important to them and have a good quality. Moreover, the higher level of fame has a celebrity, the more level of trust products that he (she) is advertising receive. This irrationality starts to be a core factor of success in plenty of marketing campaigns.
The beef prices are expected to increase not even next year, but for next few years. And this situation could be explained by few factors. First of all, the population of cows is reducing (wmdb, 1) due to bad weather condition for past years. Also, the price of keeping cows is increasing. One of the major component of this increasing are prices of corn and other food for cows. The higher are expenses of running beef business, the higher are prices for beef products. According to latest trends, the high prices for beef will be recent for few next years.
REFERENCES
Hursh, S.R. (1984). Behavioral Economics. TOC journal. Volume 42. Issue 3. p. 435 – 452.
WMBD. (2015) Economist: Beef Prices Could Stay High Into 2015. Retrieved from: http://www.clipsyndicate.com/video/playlist/10833/5242860?cpt=8&title=cengage_broadcast&wpid=6424
