12/16/2023 0 Comments Pent up cash![]() When the period of economic uncertainty passes, consumers are now able to make confident purchases. In extreme economic situations such as the one created by the pandemic(in the past year) in certain regions, they don't even have the cash to make purchases. How Does the Pent Up Demand Work? In times of economic uncertainty, consumers often withhold the desire or need to make purchases, which results in an increase in the savings rate.Īccording to consumers, they would rather defer buying particular goods and services until they are able to make purchases without straining their financial resources.ĭuring a period of markets downturn, they prefer to save finances instead of spending. This is the period when consumers are able to make purchases to meet the pent-up demand. Once the season of economic uncertainty ends and customers are able to begin spending again, an unusually strong demand explodesĪccording to economists, consumers begin to spend during the recovery phase of the economy. This pent-up demand results in a sudden burst of consumer spending when the economy improves.Įssentially, demand builds up over the period where customers are not making purchases. It is during this time that the pent-up demand takes place. Thus, consumers opt not to spend on certain goods and services resulting in decreased spending by households. There can be a reluctance to spend on consumer goods. It is important to note that consumers might be in need of particular goods and services, but they are unable to pay for them at that time.ĭuring recessions, the economic situation does not create the right environment for customer spending.įor example when there is a market downturn. They may also feel that their buying options are limited, so they defer making purchases. However, during recessions and periods of slow growth, most consumers may be more cautious about their purchases due to various factors such as decreased income as a result of lost jobs or an increase in the unemployment rate. When the economy is stable, consumers tend to buy anything they need without much hesitation. ![]() Pent-up demand refers to the building up of demand when consumers are unwilling or unable to spend on goods and services. ![]()
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