Unexpected Economic Indicators

by Elaine Schwartz    •    May 30, 2010    •    662 Views

Instead of the G.D.P., CPI, and assorted leading and lagging indicators, economists also look at an entirely different set of data. Sometimes hemlines, movie star preferences, and everyday purchases provide business cycle evidence.

During a plunge in economic activity, people’s tastes have reflected a sober outlook. Since the hemline index was created in 1926, a parallel between recessions and longer lengths has been apparent. Other research has shown that during hard times, people prefer “songs that are longer, slower, with more meaningful themes” and actresses with more mature features. Also, laxative, deodorant, rice, and beans sales tend to rise as do lipstick and make-up foundation purchases. By contrast, people buy less tobacco and carbonated drinks.

The Economic Lesson

Buying behavior takes us to the economic topic of elasticity. If we are looking at how much our quantity demanded changes (stretches) in response to a change in price or income, then elasticity is involved. For example, if we buy lots more (or lots less) rice when our income minimally changes, then our buying behavior is elastic. If buying remains relatively constant, as with chocolate during good times and bad, then our behavior is inelastic.

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