An Economic Lesson from a Bag of Potato Chips!

“The hardworking farmer must be the first to partake of the crops.”

~ 2 Timothy 2:6 (New King James Version)

The next time you purchase a bag of potato chips from the vending machine, I suggest you think about the highly complex economics underlying such a seemingly simple product, as well as all of the economic decision-making that goes into that product. Check out the ingredients, and you will find elements such as potatoes (of course!), salt, vegetable oil, canola oil, sunflower oil, maltodextrin, and a list of various other seasonings such as onion or garlic powder.

There is literally no one person or company that could produce a bag of chips.  It requires the highly impersonal market forces that drive most of the production in our economy.  A farmer in Idaho may produce the potatoes; the salt may come from a mine in Texas; and the oils, well that is a story in itself.  Vegetable oil comes from soybeans that may have been grown in Indiana.  Canola oil actually comes from rapeseed, largely grown and processed in Canada (hence the term “canola”).  A farmer in Kansas may have produced the sunflowers, and the seeds may have been processed into oil in Minnesota.  Maltodextrin is a food additive derived largely from corn that could have been harvested in Iowa.  Onion and garlic yields come from all over the country, typically grown by smaller farmers.

Now, why would all of these producers be so intricately involved in producing a simple bag of potato chips for which you pay a trifling sum of one dollar?  What is in it for them?  They produce, process, transport, and distribute these ingredients because they believe they can make a profit from doing so.  The producers are all seeking a profit and, you, the consumer, are seeking a tasty snack from which you derive “yum-yums.”  In the end, it is always about economics!

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