A Business Encyclopedia

Economic Factors Influencing Consumer Behavior

Definition: The Economic Factors are the factors that talk about the level of sales in the market and the financial position of the consumer, i.e. how much an individual spends on the purchase of goods and services that contribute to the overall sales of the company.

The following are the main economic factors that greatly influence the consumer buying behavior:

Economic Factors

  1. Personal Income: The personal income of an individual influences his buying behavior as it determines the level to which the amount is spent on the purchase of goods and services. The consumer has two types of personal incomes disposable income and discretionary income.

    The disposable personal income is the income left in hand after all the taxes, and other necessary payments have been made. The more the disposable personal income in hand the more is the expenditure on various items and vice-versa.

    The discretionary personal income is the income left after meeting all the basic necessities of life and is used for the purchase of the shopping goods, luxuries, durable goods, etc. An increase in the discretionary income results in more expenditure on the shopping goods through which the standard of living of an individual gets improved.

  2. Family Income: The family income refers to the aggregate of the sum of the income of all the family members. The total family income also influences the buying behaviors of its members. The income remaining after meeting all the basic necessities of life can be used for the purchase of shopping goods, luxury items, durable goods, etc.
  3. Income Expectations: An Individual’s expectation with respect to his income level in the future influences his buying behavior today. Such as, if a person expects his income to increase in the future, then he will spend more money on the purchase of the luxury goods, durables and shopping goods. And on the contrary, if he expects his income to fall in the future his expenditure on such items also reduces.
  4. Consumer Credit: The credit facility available to the consumer also influences his buying behavior. If the credit terms are liberal, and EMI scheme is also available, then the customers are likely to spend more on the luxury items, durable goods, and shopping goods. This credit is offered by the seller either directly or indirectly through the banks and other financial institutions.
  5. Liquid Assets: The liquid assets with the consumer also influences his buying behavior. The liquid assets are the assets that are readily convertible into the cash. If the customer has more liquid assets, then he is likely to spend more on the luxury items and the shopping goods. On the other hand, if the liquid assets are few then the expenditure on luxury items also reduces.
  6. Savings: The amount of savings out of the personal income also influences the consumer buying behavior. Such as, if the customer decides to save more for a particular period, then his expenditure on the other items will be less and in case the savings are less the expenditure on other items increases.

Note: Apart from these factors other economic conditions such as inflation, recession, business cycles, etc. also influences the consumer buying behavior.

Leave a Reply

Your email address will not be published. Required fields are marked *


Related pages

weber's theory of bureaucracybudget line equationcarrot and stick approach in managementoutflank definitionthe meaning of ethnocentrismauthoritative leadership definitionlockbox system definitionmeaning of compensation in human resource managementqualitative measures of credit controllaw diminishing marginal utilitymeaning of untappeddifferentiated marketing definitiontqm definitioncamels bankingafc economics definitiondefine social loafing psychologydisadvantages of long term loansdivest definejohari window feedbackreinforcement theory definitionquick assets ratio formulaoptionally fully convertible debenturesherzberg's hygiene theorymonopolies meaningsenior citizen saving schemestages of capital budgetingdefinition of geographic segmentationmotives for holding cashopinion polls definitiondefine isoquants in economicsmonopolistic competitioimportance of ethnocentrismarbitrage in foreign exchange marketmeaning of liquidity in economicsnonsampling errordemand forecasting methods pptneft transfer timings on saturdaygordon shapiro modelpavlov definitionmonopolistic and oligopolistic competitionsubsistence wagesthe johari window definitionwhat affects price elasticity of demandtypes of oligopolieswhat is the meaning of kiosk in hindidefinition of laissezdecoding communication definitionmeaning of inbound and outbound processstick and carrot approachexamples of sbu companieslikert management styleswhat is the meaning of debenturegeocentricity definitiondefine alpha testing and beta testingmeaning of classical conditioningexplain customer buying behaviordifference between trading account and demat accountdecentralised definitiondifference between brand equity and brand imagemicro finance meaningdefinition of jargonsbenefits of pert chartcost push inflation demand pull inflationwhat is a oligopoly in economicsexposer meaninghygiene motivation theoryrating scale method of performance appraisaldefine buzz marketingscatter chart definitionconglomerate diversification strategyoperant conditioning theoryverbal communication meaning in urdue commerce is also known as e tailinghedging finance definitionminimum limit of neft