LPU-LAGUNA

SOCIOECONOMIC IMPACT OF
BUSINESS TO CONSUMERS,
SUPPLIERS, AND HOUSEHOLDS

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Objectives
01 Identify the impact of business to consumers;

Discuss the different methods in influencing

02 consumers;

03 Explain the different factors affecting consumers.

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 LPU-LAGUNA

Effects of Business on
Consumers

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Methods to Influence Consumers
01
LPU-LAGUNA
Influence Consumers Emotionally
One way to accomplish this is to show consumers’ promotional material,
but you have to hold their attention for your material to have any
influence.

Encourage Customers to Look for Value

02 Your message emphasizes the higher value consumers get when
they solve their problem using your products.

Offer Social Responsibility

A way for your business to have a more general effect on consumer
03 behavior is to offer ways of acting in a socially responsible manner.

04 Change Behavior with Excellent Service

Your customer service goal must be to deliver flawless service every
time a consumer interacts with your business.

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Factors that Impact

Business and Consumer
Confidence
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 LPU-LAGUNA
Several Common Factors
that have the potential to cause marked shifts in sentiments:

Changes in interest Swings in the business
rates and/or cycle and associated
exchange rates, movements in
employment/
particularly if hey are
unemployment levels
rapid, large and and business
unexpected; investment intentions;
Shifts in the relative Announced policy shifts
prices of in the stance of
nondiscretionary goods government fiscal policy,
and services, notably including large structural
petrol, healthcare, spending cuts or
education and utilities increases/decreases in
prices; taxation rates.

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Several Important Consequences

from Low and Declining Levels of Confidence

1. Unusually high household and business saving rates, including the

hoarding of capital by financial and nonfinancial firms;
2. Subdued nominal income growth and tepid private sector credit
growth widespread household deleveraging;
3. Declining business investment spending and weak employment
growth;
4. Dominance of short-term thinking and absence of longer term
strategic activity;
5. Risk of a decline in the economy’s structural growth rate and
associated deterioration in productivity growth.

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 LPU-LAGUNA

Selecting the
Right Suppliers
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 Quality LPU-LAGUNA

Reputation Price

Size Turnaround

Capacity
Supplier Payment
Selection
Resolution
Reliability
Process

Flexibility Financial
Strength
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 LPU-LAGUNA
Factors Affecting Household Spending
Household Spending Household Income 01
is the most important part Increases in income encourage
households to shift spending
of aggregate demand.
Taste and Fashions 02
The pattern of spending Overtime spending on certain items
changes over time as a that are ‘in fashion’ increases
result of changes in:
Taxes and Subsidies 03
As indirect taxes and subsidies
rise and fall

Relative Prices 04
Prices of certain goods and
services

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 Determinants LPU-LAGUNA

of Spending
1. The Current Level of National Income
As income rise, the consumers tend to increase their spending on higher income
elastic goods and services, such as luxuries holidays and leisure goods. When
income falls households may postpone spending on these luxuries until income
rises again.

2. The Level of Savings

Spending and saving are mutually exclusive, which means that if income is fixed
any change in household’s savings will inversely affect spending.

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 Determinants LPU-LAGUNA

of Spending
3. Expectations
If households are confident, and have positive expectations about the future,
current spending can rise.

4. Underemployment
Underemployment has two potential effects on household spending:
a) The unemployed spend less because of their lower personal income.
b) Underemployment causes negative expectations, even for those
employed, and this can act as a curb on spending and a stimulus to
saving.

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 Determinants LPU-LAGUNA

of Spending
5. Rate of Income Tax
Changes un tax rates can clearly affect disposable post-tax income, and hence
affect household spending.

6. Interest Rates
A rise in interest rates will stimulate more savings, and less spending.

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