|Topic||Utility and Consumer Choice|
|Key Words||Sales, growth, inflation, recession, interest rates, budgets, prices|
Sales are growing modestly. In June, sales rose 2.8 percent, compared to 6.7 percent in the same stores a year before, and 4.7 percent in May. The trend was seen across each store category - national department stores, specialty retailers, discount stores, and warehouse clubs.
Retail analysts attribute the slower growth to the Fed's attempts to restrain the economy to reduce the risk of inflation, but without causing a recession. Since June 1999, the Fed has raised interest rates by 1.75 points. At the same time, sky-rocketing gas prices have led to smaller discretionary budgets.
The downward trend in sales growth is expected to continue over coming months. July may be a clearance month to create space for Fall and back-to-school items.
(Updated September 1, 2000)
1. a) Draw a diagram with axes representing the quantity of gasoline
and the quantity of all other goods and services. Add a consumer's budget
line and an indifference curve that is tangent to the budget line. Mark
the equilibrium quantities of gasoline and other goods and services bought
2. a) Overall, what has happened to the quantity of other goods and services
as a result of these changes?
|Source||Lorrie Grant, "Retailers report slowing sales," USA Today, July 7, 2000.|
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