Question

Explain how economic forces such as employment, income, prices, interest rates, and consumer confidence influence the purchasing decisions you make as a consumer.

Answer 1

Answer:

Economics forces are the factors which consumer willingness and ability to buy goods and services.eg. interest rate, employment,income ,prices,consumer confidence. let us discuss factors one by one

Employment:employment effect the purchasing power, because if you are employed then you have steady income and have much disposable income to spend and a vice a versa will happen if you are unemployed

INCOME: Income is most important factore to determine consumer purchasing decisions. if your income is high then consumer is ready to spend on everything and vice a versa will happen if income is low.

PRICES: Prices also effect the consumer decisions. because if prices of a commodity is high than consumer is not willing to buy that commodity . in simple if prices rises quantity demanded by consumer decreses and if prices decresing quantity demanded by consumer increses

INTEREST RATES:Interst rate influences the cost of borrowings, lower the interest rate ,people are willing to borrow more to spend. while increasing interst rates makes borrowing more costly then people are not willing to spend and move in favour of savings.

CONSUMER CONFIDENCE:If a consumer is confident for future risk and income effect consumer decision.high level of consumer confidence effect consumer willingness to make major purchases like cars laptop etc overall demaand for consumer goods are incresing.and a vice a versa will happen if consumer are not sure for future and income

Answer 2

'Economic Forces' are characterized as the factors that directly affect the demand and supply chain in the economy.

• The rise or fall in employment opportunities directly determines the demand for a specific good. If the consumer is earning well, his purchasing power would increase and he will purchase more and vice versa happens if he doesn't have an employment opportunity.
• Similarly, a rise in income will cause a hike in demand and enhance the purchasing power while a fall in income may restrict it.
• The interest rates and prices of goods are inversely proportional to the demand for a specific good or service in the market. The lower the price, the higher the demand, and the higher the price, the lower the demand.
• Consumer Confidence is also an important aspect because if a consumer is assured of his/her financial lookouts, he/she would purchase more but if their confidence is low, they might opt to save and demand less.

Learn more about 'Economic Forces' here:

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