Lesson 1: Consumers

The 4 economic questions:

  1. What to produce? - this is answered by consumers.

  2. How should the good be produced? - this is answered by firms (businesses)

  3. How many/much to produce? - answered by firms/consumers

  4. To whom the good should be distributed? - answered by incomes and prices (some goods are distributed to all)

What is consumer sovereignty? Consumers have the power to determine what is produce. (they drive demand which leads to supply)

How can businesses reduce consumer sovereignty?

  • advertising: encourages purchasing by persuading customers to want the product.

  • planned obscolescence: making products that intentionally dont last long which forces consumers to repurchase the product.

  • false and misleading representations: businesses make claims about that products that encourgaes consumers to purchase more or repeatedly

  • market abuse (collusion), monoplys: anti-competitive behaviour (e.g., business work in tandom to keep prices up)

Consumer Behaviour
There are 2 factors that influence consumer behaviour: 1. age, 2. income

The starting condition: Y= C+S ( income= consumption +saving )

When ‘C’ increases, it means that there is omney money in the economy than there is in savings.

When ‘Y’ increases, consumer consumption is likely to increase as they have more to spend/save (saving will potentially increase as well, as spending needs are met)