How giving Gifts hurts The Economy!
Demand and Prices
Before talking directly about gifts, we have to talk about how Demand influences prices.
It's pretty simple, in the short term, more Demand means higher prices, which sends a Price Signal to producers indicating that Consumers want more of that product!
Giving Gifts
When we buy a gift, we don't intend to use it ourselves. As such, the price we pay for it is not correlated to how much we value the product or service we're buying.
Instead, it's connected to how much we think it's worth for someone else.
Example
If we buy our loved one a very cliché box of chocolates, we might not care if we are overpaying, because the receiver of the gift will enjoy it a lot!
The problem
If we over or underpay for a good or service, only based on our estimate of what someone else likes and dislikes, we are not paying what the real Consumer of that product would pay, giving a misleading signal to producers.
Christmas
This happens on an enormous scale during the winter holiday season when people are buying and receiving many gifts.
A few days after the festivities there are many returns, which are essentially an avoidable inefficiency! They could have been prevented if people just bought gifts for themselves!
Conclusion
Now you have the perfect excuse if you don't have any gift ideas for your friends and family!
Now, for real, do you think that gifts' impact on the Economy is large? What about in the luxury goods industry? Leave your opinions in the comments!
Thanks for reading!
Remember to Upvote and Share, so that I can keep making many posts per week!
Take a look at my last posts, about Price Manipulation:
- Why cheap stuff can be bad for consumers
- Price Gouging explained. And why some think it's actually a good thing!
This was cross-posted from my blog!
20% of the payout will go towards @ph-fund!
Hello @retaliator, this is a rare but very interesting topic, because it is related to large economic movements.
I have always thought and witnessed in my country, that festive dates such as Christmas for example, Mother's Day, Father's Day and Children's Day, are conducive to people making unbridled purchases and on many occasions without taking into account the high prices for certain items, and this happens more to please "tastes and whims" than to make real displays of affection. The merchants do not have any inconvenience for this, rather with sufficient advance they prepare with enough merchandise to satisfy the demand of the consumer society.
I think that what matters most to the trade is the increase of the figures in their accounts, and we are living in times where people do not pay much attention to what they spend just to follow a trend, so the "gift industry" It could be said that it does significantly impact the local and large-scale economy.
Yeah, impulse purchases can be quite a big problem! I hope that more and more people can increase their judgment during gift-giving seasons
Buying gifts usually is a joyful process, but you've made it very depressing. :D
I was looking for some new gift ideas for this Christmas and stumbled upon your article.