The prices going down are the only good thing about a crisis; nobody complains about falling prices in energy prices or electronics; restrain for consuming because prices have been a bit lower than last year and the fact that consumers anticipate lower prices thus delay their spending is a TOTAL myth : who would delay buying gas if the price goes down by 1% or even 5%? Who would delay buying gas if he thinks the price will be 1 or 5% less in a year?? Who would delay buying anything because the price went down?? You will wait a year to buy food, a haircut, clothes, a vacation because you think it will be a bit lower in a year??
When the prices go down you are happy and richer so you buy more
Consumption is a an indirect utility function of the price meaning that consumers consume more not less when the price is lower thus they consume more when the price goes down, it has been proven each time a price has been going down
When the prices go down you are happy and richer so you buy more
Consumption is a an indirect utility function of the price meaning that consumers consume more not less when the price is lower thus they consume more when the price goes down, it has been proven each time a price has been going down
Most of your examples are necessities that have fairly inelastic demand. Without major lifestyle changes, you still need about the same amount of gas, food, electricity, etc. When you need to cut expenses, you generally look at optional purchases. Can a new computer wait until next year? Can I get by with this old car for another year? And all of that aside, have you never waited for a sale, or a better sale than the current sale, to buy clothing or a vacation trip? Have you never postponed filling your gas tank because prices are falling and you have a pretty good idea from experience that they will be a few cents cheaper next week (assuming you don't need to fill your gas tank every week)?
Also keep in mind that in a deflationary environment, as a whole, wages also drop along with prices (where a "drop in wages" may come in the form of job cut). If I think I'm going to be making less next year, or if I fear I will lose my job, then I'm going to save every penny I can this year. That kind of mentality leads to less spending and further slowing of the economy.
Less spending means the society is saving and make efficiency use of capital. Compare to the west, citizen of the east save at least 20% of their earning, low interest rate allowed the state to take on mega infrastructure project that will benefit the local citizen in the long run.
