UK retail sales volumes rise by 0.1%

The original article can be found here: LINK

This article from BBC relates to chapter 12 section 12.2 of the Economics book. One of the components of aggregate demand is consumption. "Aggregate demand (AD) is the total demand for the goods and services of a nation at a given price level and at a given period of time." (Maley, 258) Now that you know what aggregate demand is, let's define consumption. "Consumption measures all spending by domestic households on goods and services during a particular period of time." (Maley, 259). The primary determinant of consumption is the level of national income. I'm sure you can guess what that means. In the article, Ian Geddes says "With wages increasing, falling fuel prices and with a low interest rate environment, discretionary spending has been boosted by rising real incomes". To summarize, people in the UK have more money to spend because their wages are increasing faster than inflation. "People tend to increase their spending when their income improves" (Maley, 32). This increase in demand can be seen on the graph (figure 1.1)

Figure 1.1

In figure 1.1, we can see that the aggregate demand and aggregate supply lines shifted to the right. This resulted in Q1 moving to Q2, x representing the retail sales volume rise of 0.1%. Why this happened is explained in the article, as well as in the preceding paragraph.

So what does this retail sales volume rise of 0.1% mean for the future? What are the implications? The biggest growth in sales were in electrical goods and furniture. We can deduce that electrical goods and furniture are normal goods, because demand for them increased as consumer income increased. With this information, people that sell those goods could look into making their goods more affordable, since the demand is evident. That way, when consumer income is not as high there will still be a much higher demand (article mentioned a sales increase of almost 20% in both departments).

What would you do with your extra income?

*End of article*

The date the article was published: 20 August 2015

The date the commentary was written: 22.08.2015

Word count of commentary: 327 words

The section of the syllabus to which this article relates: aggregate demand and aggregate supply

References

Maley, Sean, and Jason Welker. Economics: Developed Specifically for the IB Diploma. Harlow: Pearson Education, 2011. Print.

"UK Retail Sales Volumes Rise by 0.1% - BBC News." BBC News. BBC, 20 Aug. 2015. Web. 23 Aug. 2015.