How Do Consumer Behaviors Affect Prices - Financial Literacy - أول ثانوي

2.2 How Do Consumer Behaviors Affect Prices? Learning Objective Once you have completed this lesson, you should be able to: ⚫ identify different types of consumer behaviors (rational buy- ing, emotional buying, and impulse buying) ⚫ explain the difference between economizing and optimizing. Key Terms Consumer Market economy Emotional buying Impulse buying Rational buying Economizing Optimizing Value Overspending Link to digital lesson www.lem.edu.sa How Do Consumer Behaviors Affect Prices? A market refers to where businesses sell their products and services. Markets can be physical or online. Prices within a market can often be similar as businesses try to compete with each other while making a profit. Consumers play a vital role in setting prices in a market economy. When consumers shop carefully and wisely, they help keep prices low. When consumers do not buy wisely, their actions lead to higher prices because of increased demand. Consumer a person who buys goods or services for personal use Martit ecommy production and prices are determined by competition between privately owned businesses وزارة التعليم 123-1445 CHAPTER 2 Spending 49

Emotional bllying the process of purchasing products based on desire rather than logic Consumer Behaviors Consumers behave in many different ways when shopping. Their behav- ior depends on many factors, such as scarcity, time, and demand. Consumer behavior can be divided into three broad types: 1. emotional buying 2. impulse buying 3. rational buying 1. Emotional Buying Consumers' purchasing behaviors are often influenced by their mood. For example, when a person is feeling bored, excited or optimistic, they may make unwise purchases or spend more than they would other- wise. This behavior is known as emotional buying. There are different motives for emotional buying (see Figure 2.2.1). FIGURE 2.2.1 Motives for Emotional Buying Pride Fashion Wemotions and though processes are used an electronic store? صارة الصيد 50 45 Habit Beauty the need to prove how important or rich a person is to others (and themselves) the need to look and dress like famous people or use similar products a person is used to buying a particular product and does so without thinking if a product looks beautiful or aesthetically pleasing

2. Impulse Buying When a person sees something in the store and grabs it without think- ing, they are impulse buying. Shops usually display low value, con- sumable items at key points, such as center aisles, the ends of aisles, and checkout areas. The sellers are hoping the items will catch the custom- er's eye and prompt them to buy without thinking. 3. Rational Buying When consumers act in their own best self-interests and use logic instead of emotion to make purchasing decisions, they use a rational buying strategy. There are various different factors to consider in rational buying (see Figure 2.2.2). Impulse buying purchasing something as a result of a sudden decision. without any plans to do su beforehand Rational buying the process of selecting youds and services based on needs. wants, and lugical chulces Durability How long will the product last and how much does it cost to maintain? Suitability Does the product meet the buyer's needs and requirements? Economy Can the buyer afford the product? Is it good value for money? Safety What safety requirements does the product meet? FIGURE 2.2.2 Factors to Consider in Rational Buying Emotional and impulse buying can lead to buyer's remorse. This is when a person later realizes that a poor buying decision was made and the product is of poor quality or is not needed. Rational buying often tends to be for more high value products which are intended to be used or kept for longer periods of time. Buying Strategies There are two basic strategies for rational buying of goods and services: economixing and optimizing. Consumers can use the strategy that best fits their needs for different goods and services. They should also use the strategy that best fits the state of the economy or their bank account at the time.. Economizing saving as much as possible and spending money only when necessary Optimizing getting the highest value for the money spent وزارة التعليم (123-1445 CHAPTER 2 Spending 51

وزارة التعليم 52 Financial Literacy Why is buying one six-pack of product cheaper than buying six Individual products? Economizing Consumers are economizing when they save as much as possible and spend money only when necessary. Using this approach, consumers: • • wait until it is necessary to buy a product buy as little as possible and at the lowest price they can find do not buy large quantities, or more than is currently needed try to spend as little money as they can for the needed product. Economizing has its advantages. For example, delaying the purchase of something may result in not buying it at all. Economizing can also lead to savings and better buying habits. When economizing, people may spend little or no money on luxu- ries. People may also spend less on items for basic needs, such as food or clothing. Thus, lower demand for products may lead to lower prices.

Optimizing When consumers optimize, they place more emphasis on value than on the total purchase cost. This strategy takes the form of consumers purchasing: ⚫ in large quantities to take advantage of discount pricing products on sale and storing them until needed high-quality products or services. For example, if a product that is used often is on sale and can be stored over time, a large quantity can be purchased to take advantage of dis- count pricing. When items are packaged and sold in large quantities, the cost per item is usually lower. When consumers are optimizing, demand is higher when prices are lower. Customers will buy more of a product to take advantage of lower prices. Consumers should be careful not to let optimizing lead to over- spending. Shoppers may be tempted to buy items they do not need simply because the items are a bargain. Vanue the amount of money a product is worth, of its usefulness Overspranding spending more than the allocated amount LOOKING BREED How might you optimize your spending if you are saving for an expen- sive product? Consider: 1. What are your essential current needs? How much do they cost? 2. How much do you spend on the things you want to buy? 3 How long would you want to wait before buying the expensive product? وزارة التعليم CHAPTER 2 Spending 53

درارة التعليم 54 Financial Literacy Review Questions Choose the correct answer. 1. Which of the following is a motive for rational purchasing? a. pride b. beauty c value d. habit 2. Market prices are only affected by costs, not competition. a. Que b. false 3. Optimization occurs when prices are lower. a. Live b. false 4. Which of the following options does NOT often lead to an impulse buy? a. low cost b. consumable items c. displayed at checkout areas d. high cost 5. High-value products are always the cheapest option a. liue b. false