Through
the long winter and trying weather conditions this winter, consumers and
businesses have taken some hard hits. Not only are people frustrated and tired
of the cold weather and snow but companies are struggling too.
NBC News’ article, “Financial Freeze: Winter Woes Cost the Economy
$15 Billion” discusses the various areas in which the economy took a hit during
these wintery months. Entertainment saw one of the largest effects from the
weather as people stopped going out of their way to watch movies or go shopping
because getting out and driving in the snow was more of a hazard where the
benefit didn’t outweigh the cost of traveling. Restaurants had a
disadvantage that other businesses did not; for all the people that did not
come to their place, they would never get that money made up. People will not
come in a restaurant and order three meals for some they missed a few weeks
ago. Another business that was drastically affected by the winter is car
dealers. Unfortunately, their sales dropped 2.1% or about $1.7 billion. Over
time, this will be made up; however, for the time being, it puts dealers in a
tight position. Because cars are an inelastic good but they are also durable
and last awhile, this might take some time. Along with entertainment and
car companies, industrial production slowed which was due to the large build up
of inventory. The economy took a hit with property and crop damage too. There
is nothing people can do about this but it caused food prices to increase,
the supply to decrease, and the demand to increase for certain items. If
those weather conditions were to stay the same, a potential shortage could
occur in places like grocery stores or businesses such as Wal-Mart. Hopefully,
the economy will bounce back in the second quarter after having a hard time
increasing in the first quarter.
Cumulatively, the businesses that will not be able to make up the
money will lose about $15 billion. Another issue that the weather this season
has created is that in the South, they do not have the materials to clear roads
and keep up with drastic weather conditions opposed to in the North where they
are much more prepared. Due to the fact that weather has affected the entire
nation, airline companies have had to submit to this unfortunate reality. Planes
are not able to fly in that weather which caused over 49,000 flights to be
cancelled. This however, caused a great benefit for these cancellation cities.
Hotels, restaurants, and other businesses were able to pick up many of these
consumers as their cancellations led them to extend their stays for on average
18 hours. These flight cancellations became a positive externality to this
unfortunate problem.
Overall, everything evens out because although movie
theaters and malls are emptier, more people are earning money plowing and
keeping up with the weather. Yes, the economy has taken a hit but to make up
for it are other businesses that are used more during times like this are
benefitting.
Works
Cited
"Economy Takes $50 Billion Winter Weather Hit." CNBC.
N.p., n.d. Web. 31 Mar. 2014.
<http://fm.cnbc.com/applications/cnbc.com/resources/files/2014/02/13/Winter-weather-impact-on-GDP-GDP-weather-impact_chartbuilder.png>.
"Fed confirms weather-related drag on U.S. economy in
early 2014." Reuters.
Thomson Reuters, 5 Mar. 2014. Web. 1 Apr. 2014.
<http://www.reuters.com/article/2014/03/05/us-usa-economy-fed-idUSBREA2427W20140305>.
"Financial Freeze: Winter Woes Cost the Economy $15
Billion." NBC
News. N.p., n.d. Web. 31 Mar. 2014. <http://www.nbcnews.com/storyline/deep-freeze/financial-freeze-winter-woes-cost-economy-15-billion-n29781>.
It is interesting how cold weather can decrease the demand for goods in the entertainment industry but can simultaneously increase the demand for goods like shovels, street salt, and mittens. These changes in demand come from changes in consumer expectations which seem to be on a cycle, just like the seasons. I think that is why a free market economy works so well for a country that experiences different seasons because the demand for different products changes as the weather changes, and a free market economy can easily adjust the prices accordingly. A centrally planned economy would have a more difficult time with the weather changes because even if demand for movies went down in the winter months, a centrally planned economy would not be able to easily change their price because the control is not in the hands of the consumers. Nice job Emmalee!
ReplyDeleteThe change of the weather such as seasonal changes like winter, can surely affect the economy. Just like seasonal unemployment, the demand for goods and services is affected as the temperature changes. Emmalee discusses marginal benefit vs. marginal cost, "..driving in the snow was more of a hazard where the benefit didn’t outweigh the cost of traveling", and she brings up a good thought. The elasticity of the good or service is the main focus though. You will go to the grocery store if you need groceries, however in -20 degree weather and 6 inches of snow will most of the time prevent people from going to the movies. Supply will also be affected in most grocery/food situations. Delivery could also be affected. It never came to my mind how much weather can affect the economy!
ReplyDeleteMaking a connection to another class, AP psychology, we learned that mood is often associated seasonally and that in the winter season, people are prone to swings of depression. These mood swings often prevent the motivation to go out and purchase something they might want when not in a depressed mood, such as games, movies or dining out, and people will sit at home moping around instead. This universal depressive state negatively impacts the stimulation of circular flow in the trade market.
ReplyDeleteThis is very interesting to think about how the weather could effect the economy in such a dramatic way. Honestly i never thought about the weather being a factor in the economy but now i see how. If the roads are bad, people are not going to drive in it, so they would eat at home vs. driving out. People wouldn't be going to the movies or shopping. So their money would be going towards other things, and the stores or movies would be effected by this. Also that is very true if there are flight cancellations, the other cities will benefit from the cancellations because people will have to extend their stay and be putting more money into hotels, restaurants and other necessities.
ReplyDeletePersonally, with the job I have, I have experienced first hand the affects that weather can have on a business. For example, at Thunderbay Grille, on a nice day we may get tons of customers coming in to eat, but on a winter day when the roads are bad and dangerous, it is very noticeable the amount of people who just choose to stay in for the night. Sure sometimes the weather can be looked at in this sense: its raining so I don't want to grill out; let's go out to eat. But if its a blizzard most people figure than frozen pizza at home is the smartest choice. The weather affects our decisions, our ability to make or spend money, therefore in many ways it affects our economy.
ReplyDelete