Grocery stores operate in a highly competitive market where prices are constantly adjusted to attract consumers and balance supply with demand. However, when prices drop too low, businesses may face unintended consequences, such as thin profit margins, product shortages, or reduced supplier payments. This project challenges students to investigate what happens when grocery prices fall below sustainable levels and how these price drops affect market equilibrium.

Students will explore why grocery stores lower prices—whether it’s due to price wars between competitors, discounts on perishable goods, or government price controls. They will research real-world examples where prices have fallen so low that businesses struggled to maintain profitability or supply was disrupted. For instance, when supermarkets engage in aggressive price-cutting strategies, farmers and suppliers may receive lower payments, leading to supply chain inefficiencies or even reduced product availability.

A key focus of this report will be understanding how market equilibrium is affected by price reductions. When prices drop, demand typically increases, but if businesses cannot afford to continue producing at those low prices, market shortages or quality declines can occur. Students should consider elasticity of demand, analyzing whether consumers are more likely to switch between brands or stores when prices fluctuate. They should also investigate whether government policies—such as price ceilings—play a role in distorting market equilibrium by forcing prices below sustainable levels.

The final short report should summarize key economic concepts, real-world cases, and the broader effects of excessively low grocery prices. Students should assess whether such price drops benefit or harm the economy, providing insights into the delicate balance between consumer affordability and business sustainability.