Tuesday, April 14, 2009

Consumer spending, demand, and markups

Carter Dougherty at Economix mentions that we've been seeing a decline in consumer spending during this recession--an historical oddity. I read once that consumer spending doesn't change much because most of what we buy, we have to buy. We don't buy a washing machine or a sandwich because we merely want these goods, we buy them because we need clean clothes or are hungry. So much for that idea! As credit increases what we are able to buy, we buy proportionally fewer necessities. When credit dries up, we have fewer means with which to buy stuff. Credit causes consumption to be more volative.

Andrew Cassel reports that the cause of the 2008 oil spike may have been demand expectations in developing countries. Developing countries were growing much faster than expected, which caused future demand expectations to become very high.

Mark Perry reports on the markup on iPod devices. iSuppli is a firm that takes apart devices and estimates how much the components would cost, to try to estimate the cost of making such a device.

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