Tuesday, January 27, 2009

Recessionary Spending

By Brian Redhead

The article, “The Recession: Personal Choices” by Kirsten Tagami discusses the way in which the recession impacts personal spending, and how changes in personal spending have an even greater negative affect on the economy. The author discusses how during an economic downturn, people either lose their incomes completely or experience a decline in their incomes as compared to previous years (Auerbach and Kotlikof 93). Even more, for those people that have not been laid off or seen a decline in their incomes, there is still the fear of experiencing economic problems. The news of job losses and slowdowns typically means that people cut back on their spending just in case they personally lose their jobs or experience a decline in income (Dent 4).

When all of this occurs, it has a negative impact on businesses. Customers may not necessarily stop buying particular products and services, but they will cut back (Maginn, Tuttle, Pinto and McLeavey 174). The author notes in the article that a hairdresser explains that customers who used to get a haircut every two weeks have cut back to coming once every three weeks. In addition, other customers that use to get a color and cut when they visited now forego the color and just get a basic haircut. The end result is lower revenues and lower profits for the business owner, which means even more cuts in spending for people that affects other business owners.

No comments:

Post a Comment