Product Purchases and the Economy

Product Purchases and the Economy

Alyssa Ulrich

ECO/372

March 28, 2016

Alexander Heil

Product Purchases and the Economy

As the main controller on the household finances, it is my job to budget paychecks and incoming funds accordingly. I know exactly where something can be added to the budget without making a huge difference in day to day activities. Before any new monthly payments are added to the list of bills though, plenty of research is done on the product looking to be purchased to make sure the money spent will be worth it. If it is not a necessary purchase at the moment, then a time frame is decided upon based on the economy and the trend of newer items being released and the product price being reduced.

A large recent purchase made for my family was a new Xbox One with a few games and additional controllers. It was a large purchase that would require monthly financing for a long period of time. The product had been on the market for almost 2 years prior to making the purchase. This would give us a basic indicator of if the company was going to release another product to the public pretty quickly or make price adjustments based off of how the economy was doing based on sales for the item.  

Economic Indicators

Thinking about two different economic indicators that reflect the strength of the economy that would impact the decision to purchase the Xbox One, one would be retail sales. Retail sales are a great indicator of how well the economy is doing, ("RETAIL SALES GROWTH SLOWS DOWN," 2014)   though unfortunately retail sales do not show if consumers are purchasing their items on credit and paying them off, or purchasing on credit and going into debt.  Another economic indicator would be the amount of inventory available for the particular item being purchased. (Money Crashers, 2016)   For example, when the Xbox One first came out on the market, it was sold out in most stores and online because everyone wanted one. After a little while, this was not necessarily the case. Eventually the stores were able to regulate the supply with the demand. Currently, there is a steady rate in the amount of products the stores are carrying versus how many are being purchased.

Supply and Demand Effect on the Purchase

When the Xbox One was originally released in 2013, there was a large demand for it from the consumers. The previous version of the Xbox, the Xbox 360, was originally released in 2005, almost 10 years earlier.  (Wikipedia, Marc)  That is a large time frame to go without any major updates or changes to a game system with the continuous technological changes and advancements taking place. It was, however conveniently enough, released around the same time as another brand new game system by a completely different manufacturer. This created a rivalry between the two types of game systems and the consumers purchasing them.