Social studies

Consumer Affairs
Categories of consumer

The eventual users of goods and services are consumers and the process of use is known as
consumption. The makers of goods are producers. We consume goods and services because
they have utility, which means they have some use. Goods are actual items we use while,
services are actions that other people perform for us.
Economic goods are those with a monetary value. They can be obtained without money, for
example, when food is grown for personal consumption or when a gift is received.
Free goods have no monetary value because there is a plentiful supply, for example, sunlight.

Categories of consumer

Individuals
Many goods are consumed by individuals to satisfy immediate needs and wants. Such goods are
known as consumer goods and include items such as food and clothing that are regularly
purchased to meet immediate needs. Many consumer goods do not last very long and are used
quickly. Other items are purchased because they are expected to last much longer. These items,
such as furniture or a refrigerator, are known as consumer durables and often cost larger
amounts of money.

Groups and Institutions

Groups and institutions can also be consumers. The family is a consuming unit, for example in
terms of the food needed to feed everybody or the utilities, such as water or electricity that the
family uses. Other groups such as youth club or institutions such as schools are also consumers,
buying in goods and services for their members to use.

Businesses
Businesses are consumers as well as producers. For example, a firm that needs supplies of raw
materials, components, machinery or ingredients to manufacture another product is a
consumer of those supplies. These are known as producers' goods. A business also buys the
services of its employees and frequently makes use of many other services such as banking,
logistics and transportation.

Governments and government agencies

Governments and government agencies are also consumers, buying goods and services on
behalf of the citizens they represent.

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Consumers of credit

Credit individuals and organisations to make purchases on the understanding that the cost of
the goods or services bought will be paid for at a later stage. Payment can be made when
purchasers have sufficient funds or, alternatively, by making regular repayments over a period
of time. This delayed payment can be helpful for people on lower incomes and it can help
persons to manage their money since they can know what regular outgoings will be. However,
it can be a problem for some people if they are tempted to make purchases beyond what they
can afford.
Individuals and organisations are assessed to determine their ability to pay back the amount of
credit they are seeking. Financial credit is usually made available through financial institutions
including banks and credit unions. Some companies and manufacturers also organise their own
credit facilities directly with customers.
Credit attracts interest. This is an amount of money, calculated as a percentage of the
outstanding amount, which must be paid back in addition to the original amount of credit. An
item purchased with credit will cost more than the cash price unless there is a period of
'interest- free' credit. Generally speaking, longer terms of credit mean that each regular
repayment is lower but also that the final overall purchase price will be greater.

Personal loans
Personal loans are a common form of credit, usually taken out over a set period of time and at a
specified rate of interest. People take out personal loans for many reasons, such as the
purchase of an expensive item or the funding of a particular project.

Credit cards
Credit cards are like open-ended personal loan agreements. The bank or financial institution
offering the credit card agrees an upper limit of credit with a customer. The customer uses the
card to make purchases and pays back the credit card company over a period of time. Credit
card balances can be cleared by paying off the entire amount after a given period, for example
30 days, which might be free of interest. The price of the purchase is the same as the cash price
in these circumstances.

Hire purchase
Hire purchase is an agreement between a company and a customer concerning a specific item.
The company agrees that the customer can have use of the item in return for a deposit (a
certain percentage of the cash price) together with regular payments. The goods are not owned
by the customer and the hiring company can take the goods back if there is a payment default.
The customer has the option to purchase the item once the payments made equal the cash
price plus interest.

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Mortgages
Mortgages are loans that are particularly associated with the purchase of property or the
purchase of land and the construction of a house. The mortgage lender agrees to lend the
mortgagee money, partly based on the mortgagors's ability to repay the loan. The loan will also
be secured against the value of the house being purchased or built. If the mortgagor fails to
keep up with the payments then
the house can be repossessed.

Influences on consumer
demand

The degree to which consumers require goods and services and the price they are willing to pay
for them is described as the demand. The amount of particular goods and services available is
the supply.
Consumer demand can be influenced by a number of factors.

Size of income
An individual's disposable income is the amount of money they have available after all taxes
have been paid. Generally speaking, the more disposable income a person has the more likely
they are to spend money on purchases of different kinds of goods. Higher levels of disposable
income allow people to purchase items beyond the essentials of food and clothing and to
consider purchasing luxury goods, the main purpose of which is to display wealth.

Taste patterns
Taste patterns are a critical factor in demand. Many people in the Caribbean have developed a
preference for foreign foods and Western-style clothing, which produces a high demand for
these products. Suppliers and producers seek to influence taste patterns and encourage
consumers buy particular goods and services.

Savings
An individual’s attitude to savings and the amount of money they can saved can save can affect
demand. Those who consider saving to be important will be using some of their disposable
income for this purpose rather than for making purchases. If there is a general trend in a
population towards saving then overall consumer spending can fall.

Credit
A certain amount of consumer spending relies on credit. If conditions are such that consumers
can easily obtain credit, this can stimulate consumer demand while a lower level of credit
availability can produce a decrease in demand.

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Businesses rely on credit from banks and similar institutions when they are looking to expand,
to modernise or invest in capital equipment with the aim of improving levels of productivity.
High productivity helps to keep the price of goods or services at an attractive price and so
maintain demand. Lack of credit available to businesses may affect their efficiency and
ultimately the price of their product. High prices can reduce demand and possibly damage the
business.

Fluctuations in supply
Economists recognise a relationship between supply and demand. Supply often affects price
and demand can also affect the level of supply. This relationship is known as the price
mechanism. The mechanism is the result of the many decisions made by individual consumers
and suppliers which are part of the continual interaction between these two Groups. It assumes
that the price of a good settles at a point where consumers are demanding a quantity of that
good that matches the supply available.

Supply influences price when there is a decrease in the supply while demand remains the same.
In this case the price of a good rises. Some consumers will be willing and able to pay the
increased price and the price mechanism means that the smaller number of consumers
matches the reduced supply. Eventually the price will reach a level at which most consumers
are unwilling to pay and so demand will fall. Suppliers then drop prices because there is a
surplus and, therefore, a need to stimulate demand.
In some circumstances demand influences supply. Goods in high demand attract a higher price
and suppliers can increase production to make more profit.

Quality
Whatever consumers pay for an item they expect a certain standard of quality. Most consumers
understand that cheaper goods will be of a lower quality. Consumers decide what they consider
to be 'value for money'. This term describes the desire to achieve the maximum benefit from
the money spent.
Some people can only afford cheaper goods although these are often of lower quality. Those
with higher disposable incomes may be able to afford more expensive items which are higher in
quality. There is often a suggestion that buying cheaper goods is a 'false economy' the cheaper
goods may appear to save money initially but will probably be inferior and not last as long as a
more expensive equivalent and so need replacing more quickly.

Pricing
Pricing is a key factor in determining demand. Generally, if a price is low, remembering the
issue of quality, then demand will be high. As the price rises for the same good, demand will
fall. This is known as ‘elastic demand'. Non-essential and luxury goods tend to show greater
levels of elastic demand since consumers can simply do without them if the price rises too
much. Other items, such as basic foods, show inelastic demand. This means that people still
need to buy them, despite increased prices.

Access to information
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Information about products and services is available from many sources. There are often
reviews in the media, including specialist magazines and on many Internet shopping sites.
Positive comments and reviews help increase demand for a good or service.

Advertising
Advertising exists to stimulate demand and is an important part of marketing a product'.
Advertising can be informative and persuasive. Informative advertising focuses on providing
information about the product, its function, availability and price. Persuasive advertising
accentuates certain qualities of the product and appeals to people's wants and desires.

Consumer expectations
Consumers' expectations can be built up by advertising and the release of certain information
about a product prior to its release. This heightened awareness and level of anticipation drives
up demand.
Consumers can also become aware that there may be shortage in supply of a particular good or
that the price is set to rise. Either of these situations can lead to a temporary increase in
demand.

***The end***

References

Myers, C. (2015). Social Studies: Sustainable Development and Use of Resources. Kingston,

Jamaica: Printsource International.

Sandy, M. (2012). Social Studies Essential for CSEC. Kingston 13, Jamaica: Carlog Publishers.

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