Factors that Influence Consumer Behaviour
The following factors will cause consumers to either increase or decrease their demand for a product.
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-The price of a commodity
Consumers can afford to buy more of a good when its price falls and less when its price rises.
-The prices of other goods and services (substitutes and complements)
Substitute products are those that can be used alternatively as they satisfy the same need for a consumer. For example, a weekly shopper may decide to purchase fish instead of chicken because the price fish has fallen significantly less than the price of chicken. Therefore either fish or chicken will be adequate for dinner. If by the next week the price of fish rises and becomes more expensive than chicken then the consumer will opt for chicken.
Complements are goods that are used together e.g. bread and butter. If the price of butter rises then its demand will fall and so will the demand for bread. Conversely if the price of butter falls, its demand will rise and so too will the demand for bread.
Income of consumers
As income level rises consumers will demand more goods and services
-Taste and Preferences
A change in consumers taste for goods and services will impact their demand.. For example, changes in fashion will result in a drastic decline in demand for an out going fashion and a rise in demand for what is trendy.
-Expectations of a future Rise in Price
If consumers expect the price of a commodity to rise in the near future, they will try to purchase more now, before the price increases.
Brand loyalty will ensure a continuous demand for a product regardless of changes in its price or the prices of other goods and services.
Consumer spending surveys compile information on consumer spending patterns based on income levels. This informs businesses of what goods and services are in demand.
-Changes in the size of the population
A population decline will cause demand to fall in a particular region. One reason for a population decline in a region is migration.