A Change in Consumer Attitudes
The New York Times article, “Bargain Draws Crowds, but the Thrill is Gone,” by Michael Barbaro, described the change in the attitudes of consumers on Black Friday this year compared to past years. Although the sales increased by 5 percent (to 20 billion from about 19.1 billion in 2006), more money was spent on discounted items then in past years. While in better economic times consumers shopped at higher priced stores such as Macy’s, Abercrombie and Fitch, and Nordstrom, this year more money was spent at bargain stores including Wal-mart, Target, and Big Lots. A few consumers interviewed were almost embarrassed and upset that they were obligated to shop in these types of stores. One woman actually stated that she was embarrassed to be seen at Big Lots. It seemed that this year Black Friday was more about desperation, rather then celebration.
The current explanation for this decrease in money spent by consumers is an unstable economy. There has been a decrease in the housing industry, as well as, an increase in gas prices. Consumers now have less income to spend on Christmas gifts, because more is spent on gas and other more important goods. Bill Dreher, a retail analyst at Deutsche Band Securities stated that “people are cheaping out and sticking to the essentials.” Christmas shopping is simply taking a backseat to other needs.
This change in demand can be explained by the principle of the Income Elasticity of Demand. The IED is the percent change in quantity demanded divided by the percent change in income. If IED is greater then 0, it is a normal good, and if IED is less then 0, it is an inferior good. Christmas gifts from high priced stores would be considered a normal good and a luxury, because as consume ...