Question

M5: Discussion on Households: Consumption-Saving Decision
For this discussion highlight how relevant are households' inter-temporal choices in terms of interest rates, postponing consumption (patience), credit availability, income shocks, and foresight for Walgreens Pharmacy USA.

Answer 1

Households inter-temporal choices are based on how households make decisions subject to various factors at certain points in time. In this case Walgreens Pharmacy in USA is a large scale pharmacy and is well distributed. As it relates to healthcare its products are necessary for livelihood and people won't completely cut off from purchasing the products like they do for luxury items such as cars.

Interest rates do not play any significant role in this case as the consumers won't seek out a loan to pay for small scale medical supplies. And even those who seek out a loan, do it as per cash emergency so whatever interest rates are prevalent they seek a loan at that rate, which doesn't necessarily impact the company.

They won't postpone consumption for chronic medicines as they are necessary for survival. But there would be some impact on cosmetics and other beauty product sales.

Credit availability would play a role for people who are hospitalised and need large scale medical supplies, wherein the more easy credit is available the more consumers will buy the supplies and increase their consumption level. Such as they will use credit cards.

Income shocks would also impact the low earners who have no money and insurance facility available to spend on products of this company which could harm the livelihood.

Foresight is very necessary as households will view the economic condition and the past experience by opting for healthcare insurance, which keeps the sales steady of the company as there is no deterrent for growth, because households medical supplies are covered by insurance.