Why is an economic depression bad for consumers even though prices are cheaper?
In: 88
Because those consumers typically will have less money to spend during an economic downturn. And prices aren’t necessarily cheaper during a depression, in fact the precursor for an economic depression is typically very fast growth of prices (inflation).
To explain more in depth (but still very generally as economics is a complex subject):
In basic terms and when we hear what’s good or bad for the economy we consider regular people with little savings who rely on monthly wages to make ends meet.
If you think about it you’ll realise that growth in the prices of houses isn’t as bad for someone who has 10 houses. But it is bad for someone who doesn’t have a house and is looking to save for one from putting away a part of their monthly wage. So typically we say inflation is bad because it’s bad for the majority of people but not necessarily as bad or bad at all for everyone. So just keep it mind – we (and everyone else) are talking about those working class people and their perspective.
Anyway what happens during an economic depression is businesses close down due to lack of profits (caused by many possible factors from natural disasters to markets changing to even workers wages becoming too high for the market). When businesses close they let people go, making those people go look for a job in a now smaller job market (because there are less businesses). This is hard to do and many don’t manage obviously. More unemployed people means less people with money, this means less spending. This means even more businesses closing down and so on.
A regular person will have a very hard time living unemployed since they don’t have any other assets to live off. They won’t pay their rent or bills making it worse for the landlord and whatever business bills them too. Making them lower their spending and making other business close down too.
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