Economic conditions and consumer buying behavior are inseparable. The state of the economy is significantly impactful on the buying decisions that consumers make. Consumer buying behavior refers to the ultimate customer’s buying behavior. There exist distinct characteristics and specificities influencing the individual or a consumer in what they are and the consumers in their decision-making processes, the brand they opt to buy, purchasing behavior, and shopping habits. The interplay of all or most of these factors plays a critical role in informing consumers’ purchase decisions in the market. Consumers must consider distinct economic factors to inform on their decision to buy and use a certain product or service. The societal environment, cultural trends, and social class play a vital role in influencing the decisions of consumers to purchase and use a certain product or service. Even though personal, cultural, and social factors are similarly influential, economic factors significantly impact consumers’ behavior and purchase decisions.
Many economic factors ultimately influence consumer behavior and purchase patterns. Economic factors are those surrounding sales levels in the market, consumers’ financial position, and the amount of money individuals spend when purchasing goods or services. Economic factors that considerably impact consumer purchase behavior are changes in the economy, personal income, family income, consumer credit, income expectations, and liquid assets (Baker & Yannelis, 2017). First, changes in the economy impact many aspects/areas of consumer’s life. Economic changes act as external factors affecting decision-making within businesses. They are associated with shifts in structure, economic growth, and policies whose consideration informs economic growth. Changes in the economy are influenced by distinct factors, including productivity growth and growth in workforce size. Such factors can translate to an increased overall size of the economy. Economic changes are ultimately associated with alterations and modifications in shopping behaviors among consumers (Yurievna, 2022). For example, an increase in the size of the economy may translate to a better flow of financial resources, influencing consumers to purchase more commodities. On the contrary, a decrease in the economy’s size reduces consumers’ ability to buy certain commodities, influencing their decisions. Recessions are examples of a decrease in the size of the economy, and such changes ultimately influence consumers’ purchase behaviors. Consumers may purchase only basic commodities and avoid buying luxurious ones due to such economic recession.
Personal and family income are other economic factors that considerably affect consumers’ purchase behaviors (Pawar & Naranje, 2016). This is because the income earned by individuals at personal or family levels informs their purchase decisions. Personal income refers to the total compensation individuals get from different sources of income collectively received by all persons or households in a state or country. Sharing profits from business endeavors, rents from property ownership, distributions and dividends that individuals get paid by investments, and employment are all sources of personal income. Personal income influences individuals’ purchase behavior because it dictates the levels one spends on purchasing goods and services. Discretionary and disposable incomes are types of personal incomes that influence purchase decisions made by consumers. Disposable income refers to that which is left in hand after making all necessary payments and deducting all taxes. On the other hand, discretionary personal income refers to individuals’ income after catering to all their necessities. Such income can be used to purchase luxurious goods and services. Similarly, family income is an economic factor influencing consumers’ purchase decisions. Such incomes refer to the aggregate income that all the family members have. The total income that a family has influences buying behaviors, evidenced by the family members. Families with more income spend more as opposed to low-income families. This proves that family income influences the decisions made by consumers.
Income expectations are similarly impactful on consumers’ purchase behaviors (Dangi et al., 2020). Individuals’ income levels correlate with their income expectations. Individuals’ expectations concerning their income levels in the near or far future impact the buying decisions or behaviors they show today. As noted earlier, income levels inform the purchasing powers that people have. Purchasing decisions are made based on purchasing powers. Individuals expecting higher incomes tend to purchase more as opposed to those earning low incomes. This is because higher incomes are associated with more purchasing power. People with high disposable income are compelled to spend more purchasing luxurious commodities and services. On the contrary, lower-income people tend to spend less and focus only on basic commodities such as clothing, groceries, and education. Similarly, individuals expecting to have their incomes increased in the future may spend more than those without such expectations. Those expecting a fall in income tend to reduce their spending. Consumer credit is closely related to income expectations and impacts consumer purchase behaviors. From an economic point of view, consumer credit, commonly referred to as consumer debt, refers to the credit extended to individuals to utilize in buying goods or services. The amount of consumer credit influences individuals’ buying behaviors. Credit facilities available for consumers inform the decisions they make regarding spending and buying goods or commodities (Guo, 2011). Consumers access such credits directly from sellers or through different financial institutions such as banks. Having more access to consumer credit is associated with an increased ability of consumers to buy certain goods and services. As such, consumer credit is impactful on purchase decisions made by consumers. This explains why consumer credit is one of the economic factors that notably influences consumer consumption patterns.
In conclusion, economic conditions and consumer behavior are inseparable. This is because economic conditions prevalent in a state or a country informs the ability or power consumers have as far as purchasing is concerned. Consumers base and make their decisions based on distinct economic factors. The paper reflects on distinct economic factors that influence consumer behavior. Distinct factors inform the process of buying. This explains why economic factors are integral considerations influencing the decisions made by consumers in the market. Changes in the economy influence diverse areas and aspects of consumer life. Improvements in the economy’s state enhance consumers’ ability to buy and use certain commodities. On the contrary, deterioration in a country’s state of the economy reduces the ability of consumers to buy and use commodities and services. Economic factors such as personal income, family income, consumer credit, and income expectations influence consumer behavior. Personal income, either disposable or discretionary, impacts the ability of consumers to buy. This explains why consumers’ decisions depend on their income levels. Family income is similarly impactful on consumers’ buying decisions. Individuals/consumers from families where most members have high incomes tend to spend more than those from families where most members have low incomes. Income expectations and consumer credit impact consumers’ buying powers.
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Pawar, S., & Naranje, S. (2016). ‘A Study on Factors Influencing on Buying Behaviour of Customers.’
Yurievna, S. I. (2022). Economic Changes and Their Impact on Consumer Behaviour: An Empirical Study in the Recent Economic Scenario. ECS Transactions, 107(1), 18165.