Life in the Roaring Twenties Questions and Answers

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Why did consumption increase in the 1920s?

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Economic theory tells us that consumption is based on supply and demand.  An increase in consumption can be caused by an increase in supply, an increase in demand, or some combination of the two.  In the 1920s in America, both supply and demand rose, causing consumption to rise dramatically.  Let us look at two ways in which increased demand caused this increase and one way in which the increase was caused by increased supply.

One of the things that determine demand is the amount of money that people have.  It stands to reason that people who have more money will buy more things.  During the 1920s, the economy boomed.  More people had jobs, making more money than ever before.  This meant that Americans had more money to spend and demand increased.

A second thing that determines demand is consumer tastes.  People want many things that they do not really need.  For example, we really do not need to have enough clothes to wear a different outfit every day for two weeks in a row,...

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