Frozen Yogurt stores are everywhere in my neighborhood.  YoBerry, Berry Moon, Yogurtland, Forever Yogurt, Red Mango — the list goes on.  This is somewhat of a peculiar trend on the surface, but there several reasonable explanations for why it might be taking place.

The large number of yogurt stores in my neighborhood is likely due to a high demand for the product.  People in my neighborhood love frozen yogurt, so there is room for plenty of stores in the area.  Assuming it is a perfectly competitive market, new frozen yogurt firms will continue to enter the market until supply reaches demand.  Since demand seems to be relatively high, there are a correspondingly high number of frozen yogurt stores.

But why is demand so high for frozen yogurt?  One reason is because of a great product design.  At frozen yogurt stores, people get to make their own yogurt creation.  The stores are self-serve, meaning that customers pick the exact quantity, flavor, and assortment of toppings.  Everyone that comes to these stores has ideal combinations of quantity, flavor, and toppings they would like to choose.  This can be seen as their indifference curves for frozen yogurt.  Each point on their indifference curve represents some combination of quantity, flavor and, toppings that they are equally happy with.  If the yogurt stores had preset menus, customers might be forced to pick a combination that does not fall on their indifference curve and would not maximize their utility.  However, at these yogurt stores, customers are able to purchase one of their ideal combinations and maximize their utility.  Frozen yogurt stores in my neighborhood are popular in part because a great product design allows people to pick what makes them happiest.

Another reason for the high demand of frozen yogurt is a change in consumer preference during the summer months.  Frozen yogurt stores are especially popular when it gets warm out and people want a cold, refreshing snack. Though the stores are popular year round, there is an especially high demand for them in the summer.

In addition to high demand, business owners also open a lot of frozen yogurt stores in my neighborhood because they are able to charge high prices and a make profit.  My neighborhood is made up of an affluent population who can afford to pay a relatively large amount for frozen yogurt.  As a result, the stores are able to charge a pretty high price for yogurt — usually about 5 or 6 dollars per cup — without a dramatic decrease in demand. This suggests that the price elasticity for yogurt in my neighborhood is relatively low.  If, however, these yogurt stores tried to charge 5 or 6 dollars for their product in a poorer neighborhood, they likely would not see the same results. Yogurt is a luxury good, not a necessity, so people running low on a money would probably not be willing to a pay a high price for this product.  In this scenario, the price elasticity for frozen yogurt is higher.  Fortunately for the owners of frozen yogurt stores, there are neighborhoods like mine where they can charge high prices for yogurt without seeing a dramatic decrease in demand.  This allows them to make more of a profit and increase their total revenue.

On the whole, there appear to be numerous reasons why there are so many frozen yogurt stores in my neighborhood.  The demand for these stores is high due to great product design and a change in preference during summer months.  Moreover, business owners have the incentive to open frozen yogurt stores because they can charge high prices and make a profit.  The number of frozen yogurt stores in my neighborhood may seem odd at first, but there rational economic explanations for why there are so many of them.