The global financial crisis has brought wide-ranging changes to consumer spending behaviour and consumption patterns throughout the world with the economic downturn impacting on the spending and purchasing power of people. The findings of a study conducted by Booz and Company in 2008 on consumer spending behaviour revealed that, firstly, the unprecedented confluence of the dramatic rise in oil prices, the substantial deterioration of housing values and the credit crisis, affected the overall economy and significantly changed consumer behaviour. Secondly, many consumers had already made significant cuts in their expenses and were projecting to make deeper trade-offs given the pessimistic and depressing economic forecast. Thirdly, although the low-income earners had made deeper trade-offs, yet people of all age groups and income levels have made similar adjustments and compromises across main spending areas. Fourthly, these analogies are understandable given that the majority of the local populations are exposed to similar drivers of change and spending allocations such as rising mortgage rates, declining saving funds, increasing prices of basic goods and services and many other spending considerations. However, to understand the motivators that determine consumers’ behaviour and consumption patterns, people should not conceive consumers in abstract terms. Building on Maslow’s theory of motivation, a consumer is a human being that uses goods and services available to satisfy needs and wants. People’s needs and wants will depend on which level of motivation they have reached. Besides, people do not spend their money aimlessly, they spend money on goods and services that appeal to them and according to their financial means. For exa... ... middle of paper ... ...e only ticking away a financial time bomb. For example, the recession in 2008 was mitigated because the Americans continued to spend, but it was not enough to stave off the global financial crisis. Almost all economists agree that there is no long-run paradox of thrift, and they advise that instead consumers should change their spending behaviour by paying down their credit cards. Families in almost all countries, owing to the crisis, have not only changed their consumption patterns and spending behaviour, but have also changed their lifestyle. Many people are opting for a semi-sustainable lifestyle such as in some regions, they have started community gardens where they grow fruit and vegetables. The changes are portrayed as gloomy pictures for the economy. However, we can question whether they are really gloomy or rather optimistic in terms of sustainable living.
December of 2007 saw the beginning of the worst economic downturn in memorable history; not since the end of the Great Depression in 1939 has the world seen such a devastating and long-lasting economic breakdown. The Great Recession shook the public’s faith in the capitalist system and silenced those who claimed a modern economy was impervious to another broad collapse like the one in 1929. Discontent and mistrust from the public has built not only with large corporations and the financial sector, but also with the government whose legislature and policies in recent decades seem to coincide with the interests of private corporate power-houses. These lenient policies contributed directly to the recession that affected individuals across the globe. Stunted wages, increased poverty,
Miller, R. K., & Washington, K. (2014). PART I: THE AMERICAN CONSUMER: 7. CONSUMER DEBT. Consumer Behavior, 53-56.
In 2008, the U.S economy went through the “Great Recession,” possibly as a result of inappropriate and ineffective regulation in the banking system, causing Lehman Brothers to file for bankruptcy. There was a large debt and housing bubble which resulted in plummeting real estate prices and financial securities. Peter D. Schiff’s “How an Economy Grows and Why it Crashes” uses comic illustrations and a simple storyline to teach readers about how the 2008 recession came about and how the U.S tried to relieve it using the ideas of credit, savings, and other economic concepts.
Generally it is well known in economics that purchasers always want to maximize their utility levels. The maximum utility is given by the formulae of max U = f(C, C’) being subject to the equation of future consumption {[Y – C](1+r) + W = C’ – Y’} . This is an important part for our assumptions since a customer would have problem determining his/her maximum utility for present as well as future consumption when faced with a certain lifetime budget constraint. The budget line represents the levels of consumption for both periods according to some factors such as present and future income as well as the interest rate level and has a slope of –(1+r ). Before considering the effects of a change in the interest rates it is important to understand the first step of the consumption model. In the diagrams A and B below, we can understand that (I) the indifference curves, act on behalf of the equal levels of utility satisfaction derived from different mixtures of present and future consumption. That being said the point (W), which is identified a...
This essay will examine the causes of the 2008 Global Financial Crisis (GFC) from a Marxist perspective. This paper will specifically examine and critique how Marx’s Theory of Crisis can be applied to understand and interpret the underlying structural causes of the 2008 Global Financial Crisis.
When decisions bases on a consumers finances have following consequences further than the near future, then an individuals' success economically could depend on the ability they have to foresee the upcoming rate of inflation. according to statistics, higher expectations for inflation were reported by females who were poorer, they were single and they were less educated. More specifically, higher expectations for inflation were reported by people who focused more-so with how they can cover future purchases and expenses and the prices they will pay, and by ones who have lower knowledge on financial literacy.
Consumerism is a description of society’s lifestyle in which many people embrace to achieve their goals by acquiring goods that they clearly do not need (Stearns, 7). The idea that the market is shaped by the choice of the consumers’ needs and wants can be defined as a consumer sovereignty (Goodwin, Nelson, Ackerman, Weisskopf, 2). This belief is based on the assumption that the consumer knows what it wants. Contrary to this logic, marketers convince us that the consumer does not know what they want. The consumer has to be told what they want or be persuaded by advertising items in a matter that demonstrates the reason a product makes their life easier or will improve their life instantly. As one of the most successful entrepreneurs, Steve Jobs, has said multiple times over the years, “People don’t know what they want until you show it to them” (Isaacson, 97). Consumers in this matter are negatively affected by constantly buying with the state of mind of wanting to fit in or buying the latest item.
To truly understand trends in consumption patterns, one must first understand the basic principles of economics. Economics is the science that deals with the production, distribution, and consumption of goods and services (economics, n.d.). The branch of economics dealing with particular aspects of an economy, as the price-cost relationship of an organization is called microeconomics. This aspect of economics concentrates on the laws of supply and demand. According to Colander (2004), the law of supply states quantity supplied rises as price rises, when all other factors remain constant and the law of demand states that the quantity of a good demanded is inversely related to the good’s price.
Perception is the foundation on which a consumer base their actions and reactions (Shiffman and Kanuk, 2010:172), the consumers’ perceptions are more important than their knowledge when motives and stimuli’s are aroused by marketers. Consumer behaviour can be defined as the way an individual search, purchase, use, evaluate and dispose services and products to satisfy a need (Shiffman & Kanuk, 2010:23). Perception is the way an individual selects, organises, and interprets stimuli in order to form a meaningful perception of their surroundings (Shiffman & Kanuk, 2010:175). Motivation starts when a dormant need is aroused, this arousal can be positive or negative depending on the consumer’s perception of the product or service. Dormant needs are needs that consumers are not aware of; the individual only becomes aware of the need once it is aroused (Cant et al., 2006:132). Maslow’s hierarchy of needs explains the different levels of needs that need to be satisfied to eventually reach self-actualisation (Cant et al., 2006:133).
Every company wants to understand why people decide to buy its products or others. Firstly, we have to understand why people buy certain kind of product. People buy products because they need them. A need is activated and felt when there is a sufficient discrepancy between a desired or preferred state of being and the actual state. (Engle£¬Blackwell and Miniard. 1995. p407 ) For example, when you feel hungry, what you needs is some food. It is very important for marketer to understand the needs of consumers. All the consumers may have the same needs, but the ways which they satisfy what they need are different. Here is a example, Chinese people would choose rice when they feel hungry, whilst British people may choose bread to satisfy their needs.
One of the important economic variables being tracked is the consumer price index released by the Conference Board every month. Lately, people have claimed the economy seems to have a fair projection for consumer spending to some extent based on a 3.2 index increase in the last report. More specifically, thanks to the recent spending of the top 15% households comprised by higher income families, according to the report made by Kathleen Madigan of the Wall Street Journal in the article "Vital Signs: The 15%ers Are Feeling Better — and That’s Good for Economy’. However, the article and the chart posted note an important observation regarding the study of this trend. In 2012, the Commerce Department data implied the economy would suffer as high-income consumers felt nervous about the state of the economy generating a cutback in spending. Nevertheless, the trends seems to be different nowadays given that the economy is reacting to a new financial atmosphere in a new season. The data presented by Commerce notes wealthier families have decreased their spe...
Consumer behavior is “The behavior that consumers display in searching for purchasing, using, evaluating and disposing of products, services that they expect will satisfy their needs.” (Schiffman and Kanuk, 2009).
Schiffman, L., O’cass, A., Paladino, A., D’Alessandro, S., Bednall, D. (2011) Consumer Behaviour. Australia: Pearson
Van Raaij, W. F. 1993. Postmodern consumption. Journal of Economic Psychology, 14 (3), pp. 541--563.
In the late 2000s, the World suffered from a big global economic crisis which caused “the largest and sharpest drop in global economic activity of the modern era”, in which “most major developed economies find themselves in a deep recession”, according to McKibbin and Stoeckel (1). Because its consequences have a very big impact to the whole world, many economists and scientist have tried to find the causes of the crisis; and some major causes have been emphasized are greed, the defection of the free market system, and the lack of prudent regulation and supervision. This essay will focus on the global imbalances, one of the most important causes of the current economic crisis.