Consumer Economics

Issues and Behaviors

Elizabeth B. Goldsmith

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000334685
• Edition: 4
• Topic: Business
• Subtopic: Consumer Behaviour
• Index: Business

From artificial intelligence to identity theft, from what we once thought of as unshakeable institutions to increasing concerns about privacy and sustainability, consumer issues are an integral part of daily life. This updated fourth edition of Consumer Economics offers students an accessible and thorough guide to the concerns surrounding the modern consumer and brings to light the repercussions of making uninformed decisions in today's global economy.

This definitive textbook introduces students to these potential issues and covers other key topics including consumer behavior, the history of the consumer movement, personal finance, legal rights and responsibilities, and marketing and advertising. Combining theory and practice, students are introduced to both the fundamentals of consumer economics and how to become better-informed consumers themselves.

Highlights in this new edition include the following:

• 
  
  

• New case studies and critical thinking projects to encourage students to develop their critical thinking skills through analyzing consumer issues.

• 
  
  

• Expanded coverage of social media and the impact of social influence on consumers.

• 
  
  

• Revised consumer alerts: practical advice and guidance to help students make smart consumer decisions.

• 
  
  

• A companion website with PowerPoint slides for each chapter.

Fully updated, this textbook is suitable for students studying consumer sciences—what works, what does not, and how consumers are changing.

Part 1

Consumer perspectives

Chapter 1

Consumers in a changing world

When we all think alike, then no one is thinking.

Walter Lippman

Learning objectives

1. Understand consumer motivation.
2. Define consumer economics.
3. Explain the market economy.
4. Describe Adam Smith’s contribution to consumer economics.
5. Explain the five steps in the consumption process.
6. Explain the three questions economies have to address.
7. Describe the three parts of the business cycle.

Case study

Shanghai policies hit a snag

Consumer problems, issues, and behaviors are worldwide. The variance is amazing. Consider the Chinese case study:

Confronted by a guard at the entrance to Shanghai Disney, Wang Yaura used a package of cookies above her head and gave voice to a grievance that has roiled the Chinese nation: “Why is this not allowed inside?” Walt Disney Co’s ambition to make this theme park the happiest place in China hit a snag. Restive Chinese consumers, already buy couture Western-brands such as Versace and Coach…the restrictions have led to lawsuits.

Source: Stu Woo and Erich Schwarter (August 27, 2019). Leave your lunch at home. The Wall Street Journal, p. A1l.

Case study

Buying online and data tracking

The following quote illustrates three trends pervasive in consumer purchasing behavior. There is more buying online, more sophisticated data tracking, and a growing lack of privacy.

U.S. retailers are facing a steep and persistent drop in store traffic, which is weighing on sales and prompting chains to slow store openings as shoppers make more of their purchases online. Aside from a small uptick in April, shopper visits have fallen by 5% or more from a year earlier in every month for the past two years, according to Shopper-Trak, a data firm that records store visits for retailers using tracking devices installed at 40,000 U.S. outlets.

Source: Shelly Banjo and Paul Ziobro (August 6, 2014). Shoppers flee physical stores. The Wall Street Journal, pp. B1–B2.

Introduction

This book is the story of the rise of consumer power and the changes therein. Technologies are certainly a key factor along with economic shifts and efficiencies in tandem with consumers and their need to make wise choices and thrive. Happiness is part of the equation.

In 1905, Steverson wrote that “The world is so full of things, I’m sure we should all be happy as kings.” With the advent of the Internet and mobiles, there is no question that consumers have more exposure to brands, prices, services, information, and products than ever before. What would Steverson make of today’s world? He wrote that quote during the rise of the age of consumerism; Steverson’s couplet highlights the importance of things and illustrates a childlike wonder about the possibilities set before us. If happiness is consumption, we should strive to acquire more and, if all goes well, in the end, live as kings. Unfortunately, it is not as simple as that; even the richest person cannot afford endless consumption. And, it is obvious that happiness is not so easily attained. What is the connection between happiness and consumption? What do consumers want? What motivates consumers to consume? How do they make choices? Consider these famous quotes:

Give me the luxuries of life and I will willingly do without the necessities.

Frank Lloyd Wright

When I was young, I used to think that wealth and power would bring me happiness…I was right.

Gahan Wilson

Money won’t buy happiness, but it will pay the salaries of a large research staff to study the problem.

Bill Vaughan

Daniel Gilbert, author of Stumbling on Happiness, says that money itself does not make you happy—what makes a person happy is what is done with the money. Research suggests experiences such as travel (or even broader, relationships and activities of all kinds) bring more satisfaction than durable goods. Many travelers (luxury and budget) are seizing opportunities to take adventures, such as camping, read the critical thinking exercise about the numbers of those traveling alone is going up.

Critical thinking

Traveling alone going up

Thinking of going alone or with someone on your next trip? Do you have a longed-for destination in mind?

One fifth of all leisure travelers journeyed alone in 2017, according to statistics from the U.S. Travel Association, and other research indicates that destinations such as Norway and Australia held particular appeal for their outdoor and cultural pursuits. The solo boom spans generations: millennial women are big spenders (a British Airways study of 9,000 people found 50 percent of females went alone…spurred on by a preference for experiences over things, as are tourists 65 and older, who boast longer life expectancies and higher median incomes than previous generations, per research from the University of Southern California.

Source: Sarah Bruning (July 2019). The intelligent traveler. Travel and Leisure, pp. 55–56.

Besides traveling alone going up, another huge stream of thought and action surrounds all aspects of sustainability. Sustainable behavior is a desirable goal for all of us, a positive striving toward the future. We want better lives for ourselves and our families and communities, healthier outlooks, and improved well-being. “Sustainable behavior is a multidimensional concept that includes behaviors such as conservation of natural resources through efficient use, recycling, purchase and use of green products, and other behaviors that preserve the natural environment including air and water quality” (Goldsmith, 2015, p. 3). The spike in the use of solar panels, the proliferation of solar farms, and the purchase of organic products are examples of sustainable behavior.

Critical thinking

Happiness and consumption

Think about the last time you were really happy. Where were you? Who were you with? What were you doing? Was consumption involved? Do you agree or disagree with what Daniel Gilbert says?

This chapter introduces the fundamentals of consumerism and the changing world, including the steep rise in international business in which we live. Since we are all consumers, consumer economics is not esoteric; it is applicable every day. We live more and more in a knowledge economy filled with ever-changing technology. A revolution is taking place in social media.

Through understanding consumers, we have a better sense of:

• the multiple roles of consumers
• the roles of producers/manufacturers, suppliers, and retailers
• the government involvement in economic systems, and
• the decision-making process.

Consumer economics is the study of how people deal with scarcity, fulfill needs, and select among alternative goods, services, and actions. It provides an understanding of how the marketplace works, what our role is in it, and how our choices affect our lifestyles. Studying consumer economics:

• enriches our lives by helping us get the things we want
• enlarges our awareness of the impact of globalization on our living standards, lifestyles, and future opportunities
• increases our understanding of the factors influencing our choices and the choices of others
• improves our understanding of how the marketplace works
• increases our awareness of what is fair
• encourages us to think carefully about how we spend and invest our money.

An end result of studying consumer economics is improved decision-making. Each person should be able to look back on decisions made and, for the most part, feel confident they were the right ones. Producers/manufacturers try to keep up with and anticipate consumers’ needs and have a responsibility to meet them appropriately and efficiently (Goldsmith, 2017).

Why study consumer economics?

Case study

Jessica Wright

How do we learn about personal finance and consumerism? Consider the following quote by a young woman named Jessica Wright:

When I was younger, my father would send me to the store to run his errands: “Jessica is the only one who knows how to bring back change,” he would jokingly say. I learned about credit cards from my mother and cash from my father, but the most important lesson I learned from my parents is to take care of home first. With that being our family’s golden rule, we understood that when money came in, we would take care of living necessities before spending on leisure activities. I grew up in a middle-class family with strong values in Mesquite, Texas. My mother was a free spender, but only when my brother and I needed clothes for school or we needed something for the house. I often remember hearing her say, “Charge it,” but rarely did she splurge on herself. She used to take me with her to pay bills and sometimes let me give the teller the payment. I learned that if you use credit, you still need to pay more than the minimum amount before the due date.

Source: Lessons from our parents. NEFE Digest, September/October 2014, p. 7.

Did you have a similar upbringing to Jessica’s in terms of family values and the allocation of money? Perhaps the means and methods were different, such as observing more buying online and fewer trips to the bank. It depends on the era, family, and size of community, but the sentiment remains that most personal finance and consumer economic behaviors are learned in families. The young grandchildren of this book’s author had the delightful experience of being given a tour of a local bank including a visit to the vault and given lollipops and dog biscuits to take home to their pets.

Consumer economics is a discovery process driven by curiosity and impacted by our early socialization. The purpose of this text is to provide the reader with an increased understanding of consumer economics building on previous knowledge and experience. By following the principles in this book, you will:

• increase self-awareness
• understand others’ consumption patterns and perspectives
• approach daily living with enthusiasm and a can-do spirit
• overcome limitations and weaknesses by knowi...