Consumer and Financial Decisions Flashcards
Commerce Definition:
Commerce examines how people earn their income, how they spend their money, and what goods and services are produced. It also investigates the ways in which government and the law influence people’s commercial behaviour.
What is a ‘need’?
A need is something that you can’t live without. It’s probably something that you use often. It could be something obvious like water, but could also be like some soccer shoes you need to play soccer. Or it could be your phone, because if you are an only child and are walking back from school, you may need your phone for safety reasons. If you don’t have this need, it’s a huge threat to your life.
Examples: Water, Food
What is a ‘want’?
A want is something you can live without. You probably don’t need or use it very often.
Examples: Playstation, or a pretty hat.
Goods Definition:
Any items, materials and consumable substances which are sold to the consumers, companies and government agencies. Goods are tangible.
Examples of goods are automobiles, appliances, and clothing.
Services Definition:
Tasks performed for the benefit of the recipients. Services are intangible.
Examples of services are legal advice, house cleaning, and consulting services.
Collective Whole Definition:
Those which are required by a community as a whole.
Personal Want Definition:
A want that is wanted by someone for a personal reason.
Durable Goods Definition:
Tangible products that can be stored or inventoried and that have an average life of at least three years.
Non-Durable Goods Definition:
Products with a lifetime of less than three years.
Complementary Goods Definition:
A product or service that provides value to another product or service.
Substitutes Definition:
Products that can replace each other, either perfectly or in part.
Transferable Definition:
A transfer involves the movement of assets, monetary funds, and/or ownership rights from one account to another.
Not Transferable Definition:
Not able to be used or legally owned by anyone other than a particular person
Producer Services Definition:
When services are used by producers to produce other goods and services
Consumer Services Definition:
The support you offer your customers — both before and after they buy and use your products or services.
Consumer Definition:
Individuals or businesses that consume or use goods and services.
Land Definition:
any natural resource used to produce goods and services.
Example: water, oil, copper, natural gas, coal, and forests.
Labour Definition:
The efforts exerted to produce any goods or services.
Capital Definition:
Goods used to make other goods.
Example: A tractor is a capital good because it is used to produce crops.
Enterprise Definition:
Skills and expertise of the person who has an idea or convention to bring to the marketplace. Ability to combine the other resources of land, labour and capital to earn a profit.
Scarcity Definition:
Limited or at scarce (insufficient for the demand - not enough; inadequate). Can be overutilised and become even more limited. Producers have to constantly make decisions to provide consumers with things to satisfy them.
Example: Fish becoming extinct because of overfishing.
Subsistence Definition:
The basic of needs and wants.
Example: Water and food.
Interdependence Definition:
People that rely on others.
Resource Definition:
Something that is ready to use when needed.
Example: Keeping money aside in a savings account.
What are Resources used for?
Producers use resources to manufacture the goods and services that we desire. Whilst resources are limited, the resources to create and access these wants are limited. The scarcity of resources means that businesses need to make decisions about the allocations of resources. It’s The Economic Problem and it means that choice needs to be made about:
- What to Produce
- How to Produce
- For Whom to Produce
Every decision involves a trade off - it has a cost.
Trade Off Definition:
Budgeting inevitably involves sacrificing some of X to get more of Y.
Opportunity Cost Definition:
What an individual gives up in order to satisfy a need or want.
Firm Definition:
A firm is a business organisation such as a corporation that produces and sells goods and services with the aim of generating revenue and making a profit.
How does Social Media affect consumer decisions:
Includes websites and applications that enable users to create and share content or to participate in social networking. EG: Instagram or Facebook. Social influensers influence their followers purchasing decisions. The ability to link directly to a product also encompasses the factor of convenience, consumers are able to buy something and satisfy wants. A report highlighted that consumers who are influenced by social media are 4 times more likely to spend more on purchases. Moreover, the influence can be so high that 29% of consumers are more likely to make a purchase on the same day of using social media.
How does Customer Service affect consumer decisions:
Receiving good service both before and after a sale helps to make consumers feel as though they are a valued customer. It makes customers to keep buying more. Poor service van crate the opposite effect.
How does Disposable Income affect consumer decisions:
If disposable income decreases, households have less money to spend and save, which then forces consumers to consume less and become more frugal. This decrease in consumption could then decrease corporate sales and corporate earnings, decreasing the value of individual stocks.
How does Environment affect consumer decisions:
Our environment affects our mood, and our mood affects our purchasing decisions. Good weather alone has been shown to increase consumer spending on unrelated products such as newspaper subscriptions and green tea because the extra sunlight improved mood. Specific environments can also influence our moods.
How does Price affect consumer decisions:
Usually first thing you want to know. Consumers want cheap things. Consumers will probably not buy more than they can afford.
How does Marketing affect consumer decisions:
Marketing is now done significantly through social media. Marketing: to alter the buying behaviour of consumers.
Five P’s:
- Price: Pricing strategy eg. buy one get one free
- People: Staff and salespeople employed in business
- Product: Benefits/features of product
- Promotion: Methods used to advertise
- Place: Where it’s made, sold and distributed
How does Age affect consumer decisions:
Wants change over time. The ‘tween’ market is more than $175 million a year.
How does Convenience affect consumer decisions:
Most people don’t have a lot of time to shop. Shopping should be hassle free and convenient. Consumer convenience - travelling time to shop, number of shops closer or open hours. Relates to online shopping or having access to an app. Payment types eg apple pay, afterpay
How does Culture affect consumer decisions:
Cultural factors are the set of basic values, perceptions, want and behaviours. The culture of an individual influences the way they behave. What an individual learns from their parents and relatives as a child becomes their culture. Each individual has a different set of habits, beliefs and principles that they develop from their family status and background.
What questions do consumers usually ask themselves before purchasing a good/service?
- Do I need this?
- Do I want this?
- Can I afford this?
- Do I understand this?
- Do I trust this?
- Can I defend this?
Whether to spend or save?
The most basic financial decision is how much of their income to save/spend. Many people develop a financial plan, so they have enough money for needs and wants. It might cover income and spending, and by making these plans, consumers should be able to improve their welling or quality of life. these plans are called budgets.
EG: Not eating out to save for a holiday.
What to buy?
Often the same product costs different amounts at different stores. Shopping around to obtain the best deal is referred to as comparison shopping. People compare the price, quality, availability and after-sales services. If there is a lot of difference between the prices, the cheapest item may not be the best, because of the quality and lifeline. The more you know about the items, the better shopper you will be.
EG: I wanted some sport shoes and was looking at multiple sites to find the cheapest one.
