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Homework answers / question archive / Fred told his friend that she is very fortunate as the slow-down in the economy has not decreased sales in her grocery store by much compared to the sales of new cars in his car dealership

Fred told his friend that she is very fortunate as the slow-down in the economy has not decreased sales in her grocery store by much compared to the sales of new cars in his car dealership

Business

Fred told his friend that she is very fortunate as the slow-down in the economy has not decreased sales in her grocery store by much compared to the sales of new cars in his car dealership. Explain what Fred meant using the concept of the business cycle, durable and non-durable industries.

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According to the given information, this economy is experiencing a recessionary phase of the business cycle, but the decrease in the demand captured for groceries is lesser than the decrease in the demand for cars. This situation implies that consumers have a tendency to reduce their demand for durable goods during any situation of slow-down. It could be because products are not the necessary products and can be ignored at the time of recession in an economy. On the other hand, grocery products and non-durable products are used on a daily basis in households, and individuals are needed to have such products to satisfy their hunger. Therefore, it is difficult for people to make reduction in the demand for non-durable products, same as the reduction in the demand for durable products.