Black Friday Shopping

Lindsay Wisniewski

Mrs. Straub

A3 Economics

31 October 2014

Black Friday Shopping

Black Friday is the biggest shopping day of the year; consumers can stock up on holiday gifts, and businesses can get out of the red. Black Friday is the beginning of the holiday shopping season which brings in 20-40% of business’ revenue. Prices drop drastically throughout the holiday season, and many people wonder how they make money as prices decrease so much, and the answer is everything evolves around equilibrium. This is shown in the video found at https://www.youtube.com/watch?v=DIcgJjvjH5A. Throughout the year prices of products are set slightly above equilibrium price, and this creates a surplus of items by the holiday season. With this surplus retailers price it at or below equilibrium in order to trick the buyer into believing the deal is way better than it really is. Because of the lowered price consumers buy more of the products, and eventually the surplus turns into a shortage, which was the company's ultimate goal. Because there is a shortage at the end of the holiday season there will be an increase in demand for the new products for the next year, and companies can increase their prices for these products, and the demand will not decrease due to last years shortage.

The trickery in Black Friday and the entirety of the holiday shopping season -- which lasts until December 24th -- is necessary for the economy. Businesses are often in the red before this season begins. This means that before this season companies are not making profit, and actually lose money all year, until November and December. This idea is where Black Friday gets it’s name. This is the time of year when businesses go from being “in the red” to “in the black” meaning they went from marginal loss, to marginal gain. In the graph below you can see just how much sales increase during the years. This graph shows sales from 1990 to 2009 and the pattern is all too similar throughout the years. At the end of each year there is a drastic spike, and this revolves around the holiday season. As of 2009 the chart shows a 65% growth of holiday sales over sales in January. This trend will continue, and it will continue to help business during the end of the year.

Clearly Black Friday and the holiday season benefits the individual businesses greatly, but it also impacts our GDP. One component of GDP is personal consumption, which is clearly impacted during this time of year. Each household on average spends $700 shopping during the holiday season, although many of these items are gifts, the person who buys them impacts the GDP due to this element. Business Investment is also a factor of GDP, and because they need to have a surplus of items before the holiday season, this positively impacts our economy as well, because as businesses do well we experience economic growth. Not all factors that occur however are positive during this time of year. The United States imports more than we export and during the holiday season those imports increase, which hurts our net exports component of GDP. This is a negative externality of this season. GDP is the most common way to calculate the economic progress of a given country, and around the holiday season we see our economy looking better, and making up for the rest of the year.

Not only does the holiday shopping season help our business strive and become positive for our economy due to revenue, but also job creation around this time increases tremendously. This holiday season alone businesses are projected to hire 720,000 employees, which will also help the economy. Due to the increased demand, employers need a higher supply of workers, and because it is a chaotic time of the year, employees get paid above the price floor of minimum wage. Although these jobs are often just for this time of the year, it keeps many more people out of debt during this season. The occurrence of debt is greatly decreasing over the years, and the number of jobs is increasing, which isn’t just a coincidence. Overall Black Friday is a positive for our economy as a whole, and although the day before is for giving thanks, it is the best time to go out and shop so you don’t have to pay above equilibrium, and you will be positively impacting the economy.

Works Cited

"Black Friday Sales Wreck Entire Economic System." Culture of Life News. Web. 4 Nov. 2014.

"The 4 Major Things the U.S. Is Good at Producing." About. Web. 4 Nov. 2014.

"The Economics of Black Friday." YouTube. YouTube. Web. 4 Nov. 2014.