Eco 372 Week 2 Paper

Supply and Demand

Stephanie Swinney

ECO / 372

March 28, 2016

Johnny Shull

Supply and Demand

Any large purchase that can’t be paid for up front must be budgeted for. If there is no budget in place for said product, the buyer is setting themselves up for failure. There are a few economic indicators that can be looked at and used to determine if the market is somewhat stable before making a large purchase. Using economic indicators is a smart move to make before purchasing an expensive product because it allows the buyer to see what the trends in the market have looked like and where they might go in the near future.

Making the Purchase

        I have been debating on purchasing a family vehicle for the past two years. If the economy is stable, I will purchase a new vehicle. If the market is unstable, I will be purchasing a used vehicle that will not require monthly payments to be made in order to own it. To determine how stable the economy is, I will look at the real GDP or Gross Domestic Product and the unemployment rate. “Real GDP is the one indicator that says the most about the health of the economy and the advance release will almost always move markets” (Barnes, R., 2016). In order for the real GDP to be on the positive side, it should be between 2.5% and 3.5% at a minimum (Balding, C., 2014.).

Real GDP

According to the U.S. Department of Commerce, the Real GDP increased by 3.3% in the fourth quarter of 2015 (U.S. Department of Commerce, 2016). This is great for showing that the economy is in an upward trend and is more stable than previous years. This tells me that there is more products being made and that maybe the unemployment rate is down so that the jobs are being filled. This also gives me the indication that the economy is more stable and on an upward trend.

Unemployment Rate

According to the Bureau of Labor Statistics, the unemployment rate has risen from 4.9% to 5.0% (Bureau of Labor Statistics, 2016). This happened over a one month period which was February 2016 to March 2016. This shows that the unemployment rate has risen slightly BUT this is not exactly a bad thing. The unemployment rate has been steady hovering between 5.7% and 4.9% since October 2014. This tells me that the unemployment rate is staying about the same so I don’t really have to worry about employment or not being able to make my monthly payments. Now that I have the numbers, I have to put everything together and make a decision.