Explain the impact of consumer behaviour on indian economy i
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Consumer behavior is a vital determinant of your business’ success. When the economy is performing well, consumer sentiment is strong, and people spend money. But when the economy falters, confidence falls and people cut back on their spending, even if they are not directly threatened. Understanding consumer behavior can help one to position their business to ride out a weak economy.
Consumer spending is the single most important driving force of an economy.
1. The most important determinant is disposable income. That's the average income minus taxes. Without it, no one would have the funds to buy the things they need. That makes disposable income one of the most important determinants of demand. As income increases so does demand. If manufacturers ramp up to meet demand, they create jobs. Workers' wages rise, creating more spending. It's a virtuous cycle leading to ongoing economic expansion. If demand increases but manufacturers don't increase supply, then they will raise prices. That creates inflation.
2. The second component is income per capita. It tells you how much each person has to spend. Income measurements might rise just because the population increases. Income per person reveals whether each person's standard of living is also improving.
3. Income inequality is the third determinant of spending. Some people's income may rise at a faster pace than others. The economy benefits when most of the gain goes toward low-income families. They must spend a more significant share of each dollar on necessities until they reach a living wage. The economy doesn't benefit as much when increases go toward high-income earners. They are more likely to save or invest additions to income instead of spending.
4. The fourth factor is the level of household debt. That includes credit card debt, auto loans, and school loans. Current consumer debt statistics show that household debt has reached new record levels. Surprisingly, high health care costs are one of the biggest causes of overwhelming debt.
5. The fifth determinant is consumer expectations. If people are confident, they are more likely to spend now.
Even a small downturn in consumer spending can damage the economy. As it drops off, economic growth slows. Prices will drop, which creates deflation. If slow consumer spending continues, the economy can go into recession.
But too much of a good thing can be damaging. When consumer demand exceeds manufacturers' ability to provide the goods and services, prices increase. If this goes on, it creates inflation. If consumers expect ever-increasing prices, they will spend more now. That further increases demand, forcing business to hike their prices. It becomes a self-fulfilling prophecy that is very difficult to stop.
Consumer spending is the single most important driving force of an economy.
1. The most important determinant is disposable income. That's the average income minus taxes. Without it, no one would have the funds to buy the things they need. That makes disposable income one of the most important determinants of demand. As income increases so does demand. If manufacturers ramp up to meet demand, they create jobs. Workers' wages rise, creating more spending. It's a virtuous cycle leading to ongoing economic expansion. If demand increases but manufacturers don't increase supply, then they will raise prices. That creates inflation.
2. The second component is income per capita. It tells you how much each person has to spend. Income measurements might rise just because the population increases. Income per person reveals whether each person's standard of living is also improving.
3. Income inequality is the third determinant of spending. Some people's income may rise at a faster pace than others. The economy benefits when most of the gain goes toward low-income families. They must spend a more significant share of each dollar on necessities until they reach a living wage. The economy doesn't benefit as much when increases go toward high-income earners. They are more likely to save or invest additions to income instead of spending.
4. The fourth factor is the level of household debt. That includes credit card debt, auto loans, and school loans. Current consumer debt statistics show that household debt has reached new record levels. Surprisingly, high health care costs are one of the biggest causes of overwhelming debt.
5. The fifth determinant is consumer expectations. If people are confident, they are more likely to spend now.
Even a small downturn in consumer spending can damage the economy. As it drops off, economic growth slows. Prices will drop, which creates deflation. If slow consumer spending continues, the economy can go into recession.
But too much of a good thing can be damaging. When consumer demand exceeds manufacturers' ability to provide the goods and services, prices increase. If this goes on, it creates inflation. If consumers expect ever-increasing prices, they will spend more now. That further increases demand, forcing business to hike their prices. It becomes a self-fulfilling prophecy that is very difficult to stop.
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The consumer behavior is influenced by the changing trends in the economy and also because of globalization of trade. There has been an increase in the purchasing power of the people and there are more number choices available for them
Explanation:
- The globalization of trade and advent of e-commerce has opened a number of choices for people to purchase what they want and at the prices that are economical for them. The impact of consumer behavior has resulted in changing the economy and making it more dynamic
- The consumer today is more aware of things due to new technologies and with the internet they are become more demanding and looking for quality products. The fast pace of urbanization has changed the focus of the people and made them more conscious of their surroundings
- There are vast choices of products that are available for them and they have the purchasing power to buy the products. The liberalization of trade through global markets have opened more and new doors for them and brought in variety of products.
To know more about changes in consumer behavior
How the internet is changing consumer behavior?
https://brainly.in/question/13257792
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