How much does consumption affect production?

Basic economics that explains why the cost of chicken will drop. You are ignoring supply curves, and these exist because not all producers are identical. The drive in change of costs is competition among chicken producers.

There is a price for chicken, say 10$ per unit. To make a profit, each producer must produce chicken at less than that price. However, not all producers are making chicken at the same cost. Some are more efficient than others. Some spend 9$ making a unit, some spend 8$. Some could produce chicken for 10$ a unit and don't.. When demand for chicken drops, the business with 9$ cost lowers production or leaves the industry before the business with 8$ cost. The drop in production is concentrated in the marginal producers. Similarly if the price rose, the potential producer with 10$ costs would start producing.

There is a mirror process among consumers.

Buying a widget from this mysterious alien civilization will not cause them to produce one more of it. The fundamental and founding fact of economics is scarcity, so another widget cannot be produced simply because someone would like one. Do you replace everything that is lost to you no matter what?

Never mind the question of just how you are buying this widget....

I don't really understand the sentence, "In a simplified market, I expect there to be a lowest price at which chickens can be reliably produced at scale ("the Cost")." It doesn't sound like something someone trained in economics would say.

In general, as other commenters note, you don't seem to really take into account marginal factors, the fact that firms are inherently different from one another (even if it's something like inevitable like location), or how not all industries have the same cost structure.

Markets produce to satisfy demand, and so your conclusion is probably essentially correct, but the reasoning supplied in the post does not really get you there.

Based on the comments to this article I realized a stronger appeal to established economic theory would probably be more convincing. I've made that appeal in a separate post: http://lesswrong.com/r/discussion/lw/lj0/misapplied_economics_and_overwrought_estimates/

Neat write-up. I'd say that the scale elasticity of Cost is also irrelevant, since vegetarianism promotion only has a small marginal effect on scale.

Suppose 100 chickens are produced. And, suppose 100% of the population becomes vegetarian. The number of chickens produced will drop to zero.

100 fewer chickens demanded; 100 fewer produced. So, on average, between 1 and 100, the next marginal drop in chicken demand drops production by 1.

Which elicits the question: what is the pattern from 100 down to 0?

Suppose there's suddenly only one non-vegetarian left. At today's price, he would demand 1 chicken. Clearly, prices will have to rise if only 1 is produced instead of 100. He might, then, demand only half a chicken at the new, higher price.

That means: an instant drop in demand from 100 to 1 chicken leads to an eventual drop in production of 99.5 chickens. That's 99.5 fewer produced when 99 fewer are demanded.

Also, an instant drop in demand from 0.5 to 0 leads to a drop in production from 0.5 to zero.

If the function is monotonic, it must be that a drop in demand of X units must lead to an eventual drop in production of X+f(X) units, where f(X) > 0. That's the only way the math works out.

There is a drop of X chickens produced, to match the drop in quantity demanded at price X. The extra drop of f(X) reflects the fact that even fewer chickens are demanded at the new, higher price that must result.

The relevant question is how does the chicken economy change when one person who used to demand a chicken at the market price switches to demanding no chicken at the market price. In this case, the supply-offered vs price-offered curve is not changed, the demand-offered vs price-offered is shifted down by one chicken on the demand curve at any given price point. If supply and demand curves were real, the new equilibrium would be reduced by LESS than one chicken traded, the price would be down by a tiny bit.

One can be very modern and say that supply and demand curves are not real, but they are. Chickens are produced at a variety of costs by a variety of producers. The low cost producers will change their behavior perhaps not at all with the slight price decrease in the market. But the highest cost producer, the marginal producer, should react if he is rational, and that of course is the assumption.

Consider an easier to understand situation. 1% of the market disappears, suddenly goes vegetarian. In the short run following causality, the chickens they don't buy that week go on clearance prices, a price set so that as many chickens as got unsold are priced low enough to grab some people who weren't having chicken that week at market prices. Meanwhile the store lowers its order for chickens next week. Its suppliers fill their needs at a lower price at the chicken auction. chicken producers see the lower auction price and most of them decide to hatch a few less chickens and save on the cost of chicken feed and processing.

You KNOW the market will respond with lower prices if demand is cut 50% There doesn't seem to be any quantity at which the forces that produce that disappear. Perhaps a reduction of one chicken cannot be measured reliably to have produced a lower production and a lower price, because the systematic noise in these measurements is higher than the change. But that doesn't mean the effect isn't there, we measure the effect by turning up the perturbation to a level where the effect is above the noise floor.

If SOME people switch away from chicken towards other food, then every thing we know about markets and production suggests you will see a slightly lower price and a slightly lower equilibrium production level, but the lower price will cause a switch towards chicken consumption among other people who were on the margin of demand. The reduction in net chicken production will be less than one for each demanded chicken removed from the demand curve.

The practical part of me says that one single chicken will be absorbed into fluctuations in breeding, premature chicken deaths on the farm, and a supermarket's expected excess chicken that gets donated or thrown into the garbage. Dealing with live animals and perishable products brings uncertainty and inefficiency.

Americans eat ~8 billion chickens a year. The uncertainty and inefficiency present in the market may well prevent the loss of a single chicken from ever being noticed. Those elasticity estimates are made by working with some fraction of total consumption and then extrapolating the results to individual chickens. The change you get from having 1% of the population turn vegetarian is different from having 50% go vegetarian. Go high enough and production starts getting cut faster than the fall in demand. Restrict supply, market chicken as a luxury item, and gouge the hell out of the price.

The conclusion is that an individual's change in consumption will have practically zero impact, that the change of a nontrivial minority will run into elasticity, that change of large swaths of the population will reach the 1:1 ratio, and that change in a large majority may well go past the 1:1 ratio.