Cocktail Economics: Discovering Investment Truths from Everyday Conversations

Chapter 4. Catch Elasticity If You Can: An Introduction to Industry Behavior

Economic shocks tend to be a bit more subtle than the shocks that scream at us from the newsstands—rogue tsunamis, the threat of pandemic disease, or the blasts and carnage of war. But they are of equal force when we judge their impact on industries, businesses, jobs, incomes, and profit, or on basic behavioral trends such as those related to saving, spending, and investing. Positive economic shocks—for instance, suddenly lower regulations, tax breaks, or declining inflation—bring about affirmative economic behavior: more saving, spending, and investing. They also can trigger increased national prosperity: higher economic growth, more jobs, fatter incomes, elevated corporate ...