What it Costs to Say ‘Be Mine’
Taken from:
http://www.msnbc.msn.com/id/17075025/
This article, taken from MSNBC attempts to explain the economics of the ever-so-popular holiday taking place in a matter of days; no other than Valentine's Day. Consumers this year are expected to spend an average of $120 this year on Valentine's, up from a substantial amount last year when the average was a cool $101. Men, overall will spend an average of $154, while women will spend only an average of $85. If these figures surprise you, it is shocking to think that in the U.S. alone we spend $16.9 billion on the holiday annually. V-day is a huge business for companies such as 1-800-Flowers, Hershey's, Tiffany's, and Hallmark, that make a large percentage of their profits in the month of February. An increase in consumer spending by young adults ages 18-24 can be a contributor to the recent trends in the last several years. Phil Rist, a strategist at BIGresearch claims this is due in part to the children of baby boomers who are now at the age of marriage consideration, and also the recent trend of couples spending Valentine's evenings out, instead of merely getting a gift for one another (all in all, this tends to be a more expensive option).
The whole holiday of Valentine's Day has a lot to do with supply and demand. For example, as Rist mentioned the number of young adults has increased, this has led to an increase in the number of consumers on the market, thus increasing demand for Valentine's Day products. Also, since the holiday is celebrated on the same day worldwide (considering world population is continually rising), this also increases demand. Taking the increasing number of consumers along with the other determinants of demand, it is no wonder why floral companies raise their prices close to February 14. It is not because they are necessarily trying to rip you off (although it is possible there could be a few of these sketchy operations around), but rather it's simple supply and demand. Too many people wanting too much of the same service or good at the same time. On the supply and demand graph, the area below equilibrium occurs if there are shortages, and in turn this causes businessses to increase price in order to gain profit due to resource scarcity.
Is anyone shocked by the fact that the average American spends $120 on Valentine's Day? I realize this is a pretty big holiday to a lot of people, but still, this estimate seems a little high. I thought that overall, people are having a decreasing amount of dispensable income due to increasing health care costs, but I suppose Valentine's Day doesn't really concern the elderly for the most part. Happy Valentine's.
Sunday, February 11, 2007
Sunday, February 4, 2007
"GM, Ford Post U.S. Sales Drops on Cut in Rental Sales"
From:
February 1, 2007
Article from Bloomberg:
http://www.bloomberg.com/apps/news?pid=20601103&sid=axcJdEYNcsY8&refer=us
In January GM and Ford sales plummeted, Ford falling 19% and GM 17% in a single month alone. The outrageous decrease in sales has led both companies to once again cut North American production once, for a combined total of 28 plant closings between GM and Ford. One strategy of both companies is cutting back sales to rental companies, such as Hertz and Avis to try and diminish the number of used cars being sold after the cars have been used for several years. Automotive analysist John Casesa claimed "...these are low margin sales. Those cars go to Hertz and Avis, then come back and wind up as used cars, undermining the selling of new cars." Which leads to the question, what are GM and Ford to do? First off, GM is cutting rental company sales 40% from 90,000 cars/year to 56,000 cars/year, and Ford is folllowing suit by cutting the sale 175,000 cars.
With a continually shrinking consumer demand, it is not enough for GM and Ford to benefit from limiting their sales to rental companies. To me, this is a dire situation that can only lead to both companies limiting their output and closing plants and laying off workers. When they do, it will only increase the demand for foreign vehicles (such as in the past ten years) until U.S. car companies are deemed unprofitable. This article reminded me a lot of one of the sample problems when we were studying comparitive advantage between countries. Which leads to the question, if no one wants to buy U.S. cars, why are we producing them still? and why is our country so bent on preserving the historical integrity of these companies when there's no profit to be made in producing them?
February 1, 2007
Article from Bloomberg:
http://www.bloomberg.com/apps/news?pid=20601103&sid=axcJdEYNcsY8&refer=us
In January GM and Ford sales plummeted, Ford falling 19% and GM 17% in a single month alone. The outrageous decrease in sales has led both companies to once again cut North American production once, for a combined total of 28 plant closings between GM and Ford. One strategy of both companies is cutting back sales to rental companies, such as Hertz and Avis to try and diminish the number of used cars being sold after the cars have been used for several years. Automotive analysist John Casesa claimed "...these are low margin sales. Those cars go to Hertz and Avis, then come back and wind up as used cars, undermining the selling of new cars." Which leads to the question, what are GM and Ford to do? First off, GM is cutting rental company sales 40% from 90,000 cars/year to 56,000 cars/year, and Ford is folllowing suit by cutting the sale 175,000 cars.
With a continually shrinking consumer demand, it is not enough for GM and Ford to benefit from limiting their sales to rental companies. To me, this is a dire situation that can only lead to both companies limiting their output and closing plants and laying off workers. When they do, it will only increase the demand for foreign vehicles (such as in the past ten years) until U.S. car companies are deemed unprofitable. This article reminded me a lot of one of the sample problems when we were studying comparitive advantage between countries. Which leads to the question, if no one wants to buy U.S. cars, why are we producing them still? and why is our country so bent on preserving the historical integrity of these companies when there's no profit to be made in producing them?
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