Chapter 4: Consumers in the market economy

Question 1

define consumer sov

Answer 1

consumer sov is where consumers ultimately decide what goods and services will be produced by exercising their freedom to choose to satisfy their needs
ie demand high –> raise prices –> producers shift resources to produce those goods

Question 2

identify the factors that reduce consumer sovereignty and which two are more important

Answer 2

marketing
misleading or deceptive conduct
planned obsolescence
monopolistic behaviour
(3MP)
manipulative marketing and monopoly take away consumer sov

Question 3

how can marketing reduce consumer sov

Answer 3

marketing can significantly manipulate consumers behaviour. By doing extensive research on consumers wants, interests, and fears, they can use this for mass marketing (tv and radio) and direct marketing (social media influencers)

Question 4

how can misleading or deceptive conduct reduce consumer sov

Answer 4

Consumers can be misled by false or dishonest claims
Sec 52 TPA (third party administrator?) - you are not allowed to tell ppl smth that is not true
eg weight loss supplements, investment schemes and health related products/services

Question 5

how can planned obsolescence reduce consumer sov

Answer 5

For firms to maintain competition and keep up to date, they purposefully produce goods that damage or expire quickly to encourage consumers to make future purchases in the future.
eg phones, ppl will buy for new features even though their old phone still works

Question 6

how can monopolistic behaviour (anti-competitive) reduce consumer sov

Answer 6

this is where the firm is the sole producer/supplier of all the market, hence diminish the ability of consumers to choose freely
ie single seller they are the price setter –> other options gone –> no choice but to buy from them

Question 7

write an equation for disposable income

Answer 7

Y=S+C

Question 8

what is APS AND APC

Answer 8

APC - the proportion of an individual’s income that is spent on consumption is called the average propensity to consume
APS - the proportion of an individual’s income that is saved is known as the average propensity to save
APC+APS=1
APC=consumption/disposable income
APS=savings/disposable income

Question 9

what are the factors influencing saving/dissaving

Answer 9

cultural factors, personality factors, expectations of the future, life stages and age distribution, any specific future spending plans, tax policies and availability of credit
(PLACATE)

Question 10

describe cultural factor (PLACATE)

Answer 10

eg asian economies tend to save more than industrialised economies
ultra-specific eg China saved a lot more than most economies and they do so by buying US bonds

Question 11

describe personality factors and expectations of the future
(PLACATE)

Answer 11

personality - ppl are cautious and save to anticipate the future
expectations - ppl who expect their income to rise in future are less likely to worry abt it now. However, when they worried bout future income, the eco outlook or job stability, they are more likely to exercise caution

Question 12

decribe life stages and age distirbution, and any specific future spending plans (PLACATE)

Answer 12

saving behaviours chnage over the course of our lives
ppl will save ore if they plan to make a major expense in the future eg holidays

Question 13

describe tax policies and availability of credit (PLACATE)

Answer 13

tax - by lowering tax gov can make it more attractive to spend and by lowering taxes on super savings gov can make it more attractive to save