Credit as a Production-Smoothing Device - Essay Example

News Story Introduction A market for goods and services is mainly influenced by consumers’ willingness and ability to buy at a specific price and suppliers’ ability and willingness to supply at a given price (Martha, 1989). This forces can a times lead to disparity in terms of affordability and thus economic growth. Consumers’ ability and willingness to buy a good or a service at a given market is what is generally known as demand (Martha, 1989). Suppliers’ ability and willingness to sell or supply at a specific market on the other hand is known as supply. A favorable market price therefore would mean a point of interaction between demands and supply (Martha, 1989). Irrespective of these market determined prices of goods and services economies goes through various phases of boom and depression, a fact that affect consumers ability to afford some goods and services over time (Martha, 1989). Tracing this changes in the 1920s indicated a need to establish measures that can help consumers boost their affordability of various goods and services (Martha, 1989). Introducing these measure which included among others credit buying were established to help consumers get goods and services which otherwise could have been out of their reach. Credit buying is where a consumer is given with a promise to pay later (Martha, 1989). It therefore means that with this mode an individual would be able to access goods and services that otherwise would have been out of his reach and pay for them later when he is able or in installment (Martha, 1989). Credit comes in different forms and has evolved since 1920s, incorporating technology and other modern means of payment. The most modern form of credit buying has incorporate the concept of plastic money and is to most popular known as credit cards (Martha, 1989) Credit Buying Credit buying as indicated in the introduction allows buyers to get good and services now and pay for them later (Martha, 1989). The 1920s introduced many modern conveniences and was commonly referred to as the roaring 20s for this reason. These period marked overwhelming rise of modern consumer culture (Martha, 1989). This meant rise in exciting opportunities to buy stylish clothing, cars and house appliances that defined status and comfort. Among these modern conveniences was the concept of buying on credit to help consumers buy not just within their means. With the surge of new exciting opportunities, new financing modes were introduced to help consumers cope with increasing need for an easy life (Martha, 1989). New products in the 1920s simplified house chores and thus too much time for leisure. Many consumers therefore were willing to spend beyond their means in order to be at the same consumption level as others. Credit buying among other forms of credit buying allowed households to spend beyond their current income (Martha, 1989). A single-income households for example would be able to access all these new conveniences even though they were expensive and thus impossible to afford at once. This saw many department stores opening up consumer friendly lines of credit for those who could not afford the payment at once but showed the ability to meet the payment in future (Martha, 1989). Similar installment plans were also advanced to buyers who could not afford the lump sum but could manage monthly easy payment. This saw consumer debt increase more than twice between 1920 to 1930. America’s consumer could indeed by the help of credit buying have it all if they had no worries about their accrued debt. Over half of the nation’s automobiles for example were sold on credit by the end of the decade (Martha, 1989). Consumers were therefore not worried about having to keep up with payment since economy was good. This resulted to consumer boom which performed well due to the availability of hire purchase, that is, ability to buy goods on credit (Martha, 1989). Credit buying was mostly applied in the in automobile market and before that installment buying was used to pay for just a limited number of products (Martha, 1989). In many industries credit buying expanded due increased competition in prices. Credit buying was therefore used as a tool of edging out competition by businesses (Martha, 1989). Most consumers, who were middle income earners, had developed a behavior of demanding high-tech consumer goods and therefore need to device various financing methods. Credit buying method also eventually became mostly used in buying of other goods, especially consumer goods (Martha, 1989). The use of concept of buying on credit lured many to buy goods that they previous could have not been able to afford. Credit buying also ensured expansion of the economy in the 1920 resulting in an increase in the number of middle income households with high demand for goods and services (Martha, 1989). Credit buying as a means of financing therefore plaid a very important role in helping accessing modern conveniences which came with increased production and low prices of the 1920 (Martha, 1989). Need a Family Ride? Ford Motor Company does it again, we here for you! With the festive season here the best way to stay close to your family is through putting a smile in their faces. What other way would be a better way if not that cool family road trip and a picnic lunch? Now selling at 30% off the price, there is no better way to keep your family together! With this grand c-max family car you are guaranteed a happy family. It comes with pocket friendly fuel consumption rate, speed, comfortable interior and one year guarantee. There can never be a better way to make a better family! Remember a family that rides together stays together. Hurry while stock last! Ford Motor Company: Go Further How credit buying reflects social trends of the 1920s From the topic above it is clear that 1920s was a time of prosperity and new opportunities. Good and services were affordable and means even the low income earners were able to access any amenities of their choice (Martha, 1989). With this social trends leaned towards much leisure as the household chores were reduced through high-tech machine which were readily available. Due to affordability this period marked large use of telephones, electricity, accelerated consumer demand and significant alterations in lifestyle and culture (Martha, 1989). This also means schooling among the young people increased with young people seeking higher education and these campuses became prime centers for new fashion trends to emerge (Martha, 1989). Credit buying brought with it increased production capability and thus a surge in middle income households with high demand for consumer goods (Martha, 1989). This prosperity came with leisure and innovation as people has more time to concentrate on other measures to enhance the existing production means. Entertainment was given a boost with more attention among others innovation in film, radio, music, dance and fashion. Jazz music in particular became widely popular in the 1920s and all these were brought by the factor that people had a lot of time at their disposal to concentrate on other activities other than production of goods and services. Reference Martha L. Olney (1989). “Credit as a Production-Smoothing Device: The case of Automobile, 1913-1938.”. The Journal of Economics History, 49(2), 377-391. Retrieved from http://journals.cambridge.org/article_S0022050700008007 Read More