Lecture 7 Economic and demographic determinants of consumer behavior
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Economic and Demographic Determinants of Consumer behavior
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Lecture 7 Economic and demographic determinants of consumer behavior
- 2. ECONOMIC DETERMINANTS People buy products from rational motives Maximum value for money! income price credits
- 3. ECONOMIC DETERMINANTS Income1 Discretionary income– financial basis for buying! Total income (Gross income) - Taxes Disposable income (Net income) -Binding (mandatory) charges and expenditures on necessary items (food, water, electricity, gas, rent, clothing, utilities, medicaments) Discretionary income****** -Spending (luxury products, vacations, non-essential goods and services) - Savings financial uncertainty planned future activities
- 4. ECONOMIC DETERMINANTS Income1 Economic law “When income increases, demand increases too” Necessary item for life, less elasticity! Not so necessary item for life, more elasticity!
- 5. ECONOMIC DETERMINANTS Price2 Economic law “When price increases, demand decreases" “When price decreases, demand increases" price quantity D
- 6. ECONOMIC DETERMINANTS Price2 Exceptions of Law of Demand Giffen's paradox “When price rises, the demand increases too” price quantity D Inferior goods
- 7. ECONOMIC DETERMINANTS Price2 Exceptions of Law of Demand Veblen's paradox "With an increase of the price, demand increases as well" “When price falls, demand decreases as well" price quality D Luxury goods
- 8. ECONOMIC DETERMINANTS Price2 Exceptions of Law of Demand Case of speculation “When the increase of a price is expected, demand increases as well” price quantity D Speculative products
- 9. ECONOMIC DETERMINANTS Credits3 Demand can be stimulated by taking credits! Durable, expensive goods
- 10. DEMOGRAPHIC DETERMINANTS Population1 2 3 4 5 6 7 Geographical distribution Internal migrations Education National structure Age structure Family life cycle
- 11. DEMOGRAPHIC DETERMINANTS Population1 Market size, global consumption
- 12. DEMOGRAPHIC DETERMINANTS 2 Climate and geographical regions, municipalities Rural vs. Urban population Central versus peripheral part of the municipality Geographical distribution
- 13. DEMOGRAPHIC DETERMINANTS 3 Population mobility from one place to another – due to living Social mobility – mobility due the change of working place Internal migrations
- 15. DEMOGRAPHIC DETERMINANTS 5 National structure
- 16. DEMOGRAPHIC DETERMINANTS 6 Age structure
- 17. DEMOGRAPHIC DETERMINANTS 7 Family Life Cycle baby child teen ager stud ent
- 18. MINI TEST Explain the following items: • Disposable income: ------------------------------ • Giffen goods: ----------------------------- • Veblen goods:---------------------------- • Savings:--------------------------------------- • Speculative goods:--------------------------------------------- • Internal migrations:---------------------------------------------- • Age structure:--------------------------- • National structure:-------------------------------------------
Editor's Notes
- Normal goods have a positive income elasticity of demand so as consumers’ income rises more is demanded at each price i.e. there is an outward shift of the demand curve
- Normal goods have a positive income elasticity of demand so as consumers’ income rises more is demanded at each price i.e. there is an outward shift of the demand curve
- Inferior goods have a negative income elasticity of demand meaning that demand falls as income rises.