Same mountain, same snow, same prices, and a hundred fewer skiers. Sometimes the reason isn't on your mountain at all: it's in how households feel about the economy.
Learning objectives. After this week you can (1) list the parts of aggregate demand; (2) name what shifts it up or down; and (3) read confidence and unemployment as demand signals for your resort.
Remember this: you don't set aggregate demand. You read it, then price into it.
1) What aggregate demand is
AD = C + I + G + NX
Aggregate demand (AD) is total spending on goods and services in an economy, built from the same four parts as GDP. Consumption (C) is the largest piece in most economies, so anything that changes how much households spend moves the whole economy. Government spending (G) and exports are part of it too: more exports, all else equal, raise AD.
2) What shifts AD
- Consumer confidence. Secure households spend more; worried ones cut discretionary spending first.
- Interest rates. Higher rates make borrowing costly and pull AD down; lower rates push it up.
- Wealth and income. Rising wealth (stocks up) or a tax cut lifts consumption; a tax increase lowers it.
- Energy prices. A fuel spike leaves households less to spend on everything else.
3) Why ski trips are so exposed
A ski trip is income-elastic: far more sensitive to income and confidence than groceries. In a recession, discretionary purchases like ski trips fall first and hardest. That makes a resort a pure test of reading aggregate demand.
4) Reading demand at your resort
The report's Macro environment line says demand moves with confidence, unemployment, and your price against the competitor. Fuel lands on your cost side instead: your decision form marks grooming and plowing as fuel-sensitive. So when confidence slides, look for it in your visits.
Percent Change in Visits = (New − Old) ÷ Old × 100
Tuesday: confidence 68, 700 visits. Thursday: confidence 58, 640 visits, same prices and similar weather. Visits changed (640 − 700) ÷ 700 × 100 ≈ −8.6%. Weather and events move visits too, so compare days that looked alike.
Quick self-check
(a) Consumer confidence falls sharply. What happens to demand for ski trips? (b) Does a tax cut shift AD up or down? (c) Visits go from 800 to 720. Percent change? (Answers: it falls; up; −10%.)
Common mistakes
- Treating AD as one firm's price. AD is the whole economy's spending.
- Blaming every slow day on your prices. Check confidence and unemployment first.
- Reading fuel as a visit signal on your resort. On your report it shows up in costs.
This week in the arena
Find the days this week with the highest and lowest consumer confidence. Put their visits side by side, along with the weather and the event line for each. How much of the gap can the economy explain?