Econ 101 Model Building Exercise - Research Paper Example

This means that economic recession cues may actually enhance interest in products that make people more attractive and presentable, despite the fact that recessions dampen interest in majority of product segments. By identifying why and how economic depressions and recessions affect the psychology of women, this model should enrich developing links between consumer behavior, economic conditions, and gender relationships psychology. Civi (2013) establishes that economic recessions can be associated reliably with increased consumer spending on traditional inferior goods, for example foregoing salmon for tuna due to budgetary constraints, as well as morale boosters like films.

Whereas his research identifies increased spending on beauty and personal care products, the suggestion made is that this spending could be a third economic recession indicator, which has deep roots in human ancestral psychology. Ratner et al (2014), in turn, note that the economic recession of 2007/2008 saw a down-turn in spending for most consumer products and real estate consistent with other economic declines, while people were less likely to go on vacation to instead spending time at home.

However, even with the predictable decline in consumer spending during the last recession, beauty and personal care products fared unusually well. Lopaciuk and Loboda (2013) supports this conclusion, showing that while the rest of the economy suffered record sales decline, cosmetic companies like L’Oreal experienced a 5.3% sales growth, using this evidence as proof of the ‘lipstick effect’. This idea, it is noted, has been subject to discussion and debate in recent economic downturns, especially in the Great Depression during which sales in cosmetics grew dramatically.

While consumer spending has always tended to decline in the midst of economic downturns and recessions, there is compelling evidence that economic recessions are linked to increased consumer spending on