Boom! Flashcards
Why was there an increase in the demand for goods?
- Mass Production made them cheaper
- The price of goods were falling
- Wages were rising (the average wage rose by 8% in the 1920’s)
- More homes were connected to the electricity grid, so the new goods could be used
- Advertising was big business, persuading people they wanted and needed the new goods
What was hire purchase?
Shops set up payment-in-instalments schemes. They would pay a deposit for a good and then pay the rest off in regular instalments.
What was the boom cycle?
More goods made> more workers employed>more wages spent > more goods bought
What are shares? How were they used?
A share is owning part of a company.
If a person needed money to help set up or expand their company they would sell shares in their company meaning that they no longer owned it fully.
By the end of the year if the company has made a profit this would be split between the shareholders depending on the size of their share.
How did the stock market work?
This is the general name for buying and selling shares. Due to shares not having a set value they were worth whatever someone was prepared to pay for them.
The people who traded shares were called ‘brokers’.
If the selling was slow then the prices of shares could stay the same for days, whereas if there was a lot of buying and selling the price could go up or down in a day.
What was ‘buying on the margin’?
People were so optimistic that the price of shares would continue to rise that they began to borrow money in order to pay for the share.
They were confident that they would sell them for more and repay the loan.
Why did older industries not benefit from the boom?
Coal mining- During the war they were full of production. However, after the war the use of coal dropped rapidly because both homes and businesses began to use electricity instead.
Shipbuilding- The war had increased the need for ships but the demand had fallen post-war.
Railways- Many people had now bought cars so the demand for the railways decreased. Also companies chose to transport goods by truck on the network of new surfaced roads.
Why did farmers not benefit from the boom?
During the war- Farmers had bought more land and equipment (which was often borrowed money) to make more food. They were growing not only for the American market but for the European one too.
After the war- A couple of year after the war this demand was not needed no longer. Prohibition meant there was no longer a demand for grapes and clothing moved away from cotton to new synthetic fabrics. Farmers costs were high and prices were falling. This led to many farmers starting to go bankrupt.
