Ohlis

1. What is the main problem in this case?
Food has increased its prices, affecting people in many different ways.

2. What are the causes of inflation that are stated in the case?
It is causedbecause of the rise in the price of energy and the effect that they have on food. For example the increase in oil price, lead to an increase in the demand of ethanol. Consequently, corn prices risebecause of the increase in the demand of corn to produce ethanol. If corn prices rise, other food that needs corn to be produced, increase. Another factor is the decline in the value of dollar, increasingthe imports and the foreign demand for US agricultural output.

3. What is the relation between spending habits and income level?
Depending on the income level one person has, the spending habitswill be different. A person with low income will spend more for food to eat in their houses rather than in restaurants.

4. What are the reasons for which certain groups spend more in food consumedat home than in food consumed in restaurants? What are the effects of these spending habits?
People with low income won’t go to restaurants as often as the ones with low incomes. It is more expensiveto buy food outside that to consume it in home. And people with low income spend almost all their money in food, so they are more affected than the other ones.

5. According to your answer for lastquestion, what group is more affected by food inflation? Why?
House holders with low incomes, because they spend more money in food consumed in home than the ones that have high income. Their wagedoes not increase as the food does, so they have problems.

6. From the income level viewpoint, what group suffers more with food inflation, overall?
The lower income and elderly households,people who is poorer, also stamp recipients.

7. What is the impact of food inflation on food stamp recipients?
The impact is reduced because food stamp benefit amounts are added to food prices....