Comprehensive Study Notes on Consumption and Consumer Rights

Definitions and Fundamental Concepts of Consumption

  • Consumption Defined: Consumption is the process of using money to purchase goods and services that satisfy human needs or wants. It is explicitly defined as the act of buying and using these goods and services.
  • The Link Between Production and Consumption: Economic theory posits that the production of goods and services should actively respond to what consumers choose to buy and use.
  • Economic Progress: As individuals work to satisfy their needs and wants, economic activities like consumption and production continue to progress.
  • Satisfaction: This refers to the happiness, utility, or benefit gained from using a product or service.
  • Economic Growth: Through the act of consumption, individuals contribute directly to the growth and development of the overall economy.

Types of Consumption

  • Direct Consumption: This refers to using goods and services specifically to satisfy personal needs immediately.
  • Productive Consumption: This involves using goods or services for the purpose of producing other goods.
    • Example: Using flour as a raw material to bake bread that will eventually be sold.
  • Wasteful Consumption: This is defined as using more than what is necessary for one's needs.
    • Example: Leaving food uneaten or letting it go to waste after purchase.
  • Harmful Consumption: This refers to the utilization of products that cause damage to an individual's health.
    • Named Examples: Cigarettes and illegal drugs.
  • Quick Consumption: This is described as the rapid acquisition, use, and disposal of goods and services. It is characterized by providing immediate or momentary satisfaction rather than long-term utility.

Factors That Influence Consumption

  • 1. Price: The cost of a product significantly dictates consumer behavior. Consumers compare prices across different venues:
    • Tiangge/Palengke (Wet Market) Price Examples: $100.00\$100.00
    • Department Store Price Examples: $299.75\$299.75
    • Branded Apparel Store Price Examples: $499.00\$499.00
  • 2. Advertisements: These are tools used to motivate and persuade consumers to buy, try, or use certain products. Companies employ various techniques to attract buyers:
    • Bandwagon: Encourages people to join the "many satisfied users" (e.g., "America Runs on Dunkin'" or the popularity of Great Lash Mascara, where one tube is sold every 1.71.7 seconds).
    • Testimonial: Features endorsements by popular celebrities or appealing models to build trust or desire.
    • Branding: Highlights the specific good qualities or the established identity of a product to make it stand out (e.g., POND'S Clearer Skin in 77 days).
  • 3. Income: Consumption levels depend heavily on a person's financial resources. The transcript categorizes income levels as follows:
    • Low Income: Approximately $200/month\$200/month. Consumers focus primarily on daily living needs.
    • Middle Income: Approximately $600/month\$600/month. Consumers seek comfort and prioritize saving for the future.
    • High Income: Approximately $2,000+/month\$2,000+/month. Consumers value quality of life, convenience, and the well-being of the family.
  • Engel’s Law: Formulated by German economist Ernst Engel, this law states that when income is low, a large portion of it is spent on food. As income rises, the proportion (percentage) spent on food decreases, even if the total absolute amount spent on food increases.
  • 4. Occasions: Special events lead to spikes in spending. Traditions like gift-giving, feasting, and special dining motivate purchases that people would not generally make during the rest of the year.
    • Examples: Noche Buena, Media Noche, and Weddings.
  • 5. Imitation/Bandwagon: Consumers often buy products to associate themselves with the status, personality, or popularity of the users or endorsers.
    • Emotionally driven buyers find reassurance in following the crowd.
    • The desire to possess what idols, friends, or neighbors have can lead to excessive consumption.
    • Named Example: LANY fans eating at Jollibee during a surprise takeover in the Philippines.
  • 6. Values: Personal attitudes and behaviors shape consumption habits:
    • Frugal Consumers: Plan purchases carefully, stick to a budget (Example: A budget of $500\$500 and a strict shopping list), and avoid impulsive buys.
    • Impulsive Consumers: Buy things based on want regardless of actual need.
  • 7. Seasons: Changes in weather and time of year dictate needs.
    • Cold/Rainy Season: Purchases of jackets and umbrellas.
    • Summer: Purchases of tank tops and summer wear.
  • 8. Peer Pressure and Social Media Influence: Current trends on social media and recommendations from peers (e.g., "sale today" notifications or influencer secrets for grooming) drive modern consumption patterns.

The Consumer: Definitions and Wise Characteristics

  • Who is a Consumer?: Every individual is a consumer. A consumer is a person who purchases and uses products and services to satisfy personal needs through direct consumption.
  • Consumer Products: Goods and services used by individuals for their specific individual or household needs.
  • Consumer Services: Services offered by businesses to repair, maintain, or improve products owned by customers.
Characteristics of a Wise Consumer
  1. Alert: Because cheating is common among traders, wise consumers remain watchful during transactions to avoid being defrauded.
  2. Budget Conscious: They avoid impulsive buying, evaluating every purchase to ensure it fits within their financial plan.
  3. Reasonable: Consumers seek a balance between price and quantity. They want the highest possible quality for a competitive price but expect lower prices for lower-quality goods.
  4. Uninfluenced by Advertisement: They judge products based on intrinsic value, quality, and price rather than the flashiness of an ad or the fame of an endorser.
  5. Analytical: They patiently examine a product's quality, benefits, and value, comparing options before making a final decision.
  6. Seeking Substitutes: If a preferred product is unavailable, a wise consumer finds the best alternative that fits their budget and needs.
  7. Avoiding Panic Buying: Decisions are made rationally rather than out of fear, excitement, or panic.

Consumerism, Rights, and Responsibilities

  • Consumerism: A movement designed to protect consumers' rights to fair business practices and to provide education to assist in making informed decisions.
The Eight Rights of a Consumer
  1. Right to Basic Needs: Access to an ample supply of goods at reasonable prices.
  2. Right to Safety: Protection from hazardous products; authorities must inform the public about food contamination, toxic substances, or unsafe items.
  3. Right to Proper Information: Accuracy in advertising to prevent consumers from being misled or deceived.
  4. Right to Choose: Freedom to select preferred products; includes the right to return defective items.
  5. Right for Representation: The ability to form organizations that participate in policy-making and advocate against fraud and unethical conduct.
  6. Right to Redress: The right to demand compensation (refunds, replacements, or repairs) for defective products or poor service.
  7. Right to Consumer Education: The right to be informed about rights and responsibilities to avoid deceptive practices.
  8. Right to a Healthy Environment: Ensuring marketplaces are inspected and health permits are issued to protect against health hazards.
Duties of a Consumer
  • Vigilance: Always be alert and mindful of unethical practices; stay vigilant and take action when necessary.
  • Unity: Consumers should unite to protect their collective rights.
  • Environmental Protection: Actively working to protect the environment.
  • Support Local: Prioritizing and supporting local industries.