The holidays: a time when family and loved ones gather together, share food and drink, and sing merrily in groups; when children sit and speak loudly on the lap of a stranger in a crowded and enclosed mall; when shoppers stand shoulder-to-shoulder, milling through stores and examining goods until they find the perfect gift.
Or at least a time when these activities used to happen. But not in 2020.
The current pandemic has significantly affected every aspect of life around the globe. As certain activities carry greater risk for the spread of the pandemic, families and consumers are forced to make difficult decisions about how and where to shop, which holiday traditions to participate in, and even whether or not to spend the holidays with their loved ones. The limitations imposed by COVID-19 still leave room for other options during the holidays. However, some businesses that are not holiday-specific may also experience adverse effects from pandemic restrictions. We can analyze these phenomena with the economic concepts of substitute and complementary goods.
In economic theory, substitute goods are those that a consumer could purchase for roughly the same purpose or reason. That is, the consumer would buy one or the other, but not both. For example, if I were to travel for the holidays (please follow the public health guidelines for your area), I could fly or drive. Both modes of transportation will get me to my destination. Under non-pandemic circumstances, I might consider the shorter travel time by plane in contrast to the slower but less complicated car trip. However, given the increased “cost” of potentially being exposed to COVID-19 on the flight, I would drive and not buy a plane ticket. In economics jargon, we would say that as the price of one good (the plane ticket) increases, the quantity demanded for the substitute good (the car ride) will increase. Other festive examples could be families ordering smaller turkeys or turkey breasts in place of large turkeys for a crowd, masks and mistletoe (If you are buying a mask for safety reasons, you should not be buying mistletoe; also, don’t kiss anyone without their consent), or retailers swapping the early morning rush on Black Friday with new online sales and promotions.
Substitute goods are in contrast to complementary goods, which are usually purchased together—peanut butter and jelly or a coloring book and crayons, for instance. For complementary goods, if a consumer buys one of the goods, they likely purchase the complementary good as well. For example, if I go to a production of the Nutcracker with my friends, we would likely go to dinner beforehand at a restaurant near the theater. However, social distancing restrictions make it impossible for productions to occur. Since we cannot go to the ballet, my friends and I would not have dinner near the theater either. In this case, even though nothing changed about the restaurant, we would not go there because of the lack of performance. Other examples could be a decrease in sales for milk, if families can’t leave cookies out for Santa given the “cost” of COVID safety concerns; or, if catering companies that usually work at large Thanksgiving or holiday parties have empty schedules, companies that produce and sell chafing dishes would likely also see a dip even though chafing dishes are a year-round good. Since the price increased for one good, the quantity demanded for the complementary good will also fall.
So where does this leave us for the upcoming holiday season? Like most of 2020, who can predict? While it’s clear that many holiday traditions cannot occur safely in their usual forms, people have been finding suitable substitutes for their celebrations. Whether it involves smaller Thanksgiving turkeys, drive-through light displays, or moving traditional holiday performances online, people won’t be stopped from enjoying the holidays however they can.
One question remains, though: how will Santa visit every home without becoming a super-spreader?