A business has to act and react to what happens inside and outside of the company. Businesses exist within an external environment. This external environment is concerned with consumption and production. Economics is one of the main factors which is related to costs and prices of goods. What consumers want and need income, interest rates, exchange rates and rate of inflation (Sloman &Boer, 2009). This report undertakes secondary research to identify facts and trends for our SBE named as ‘Digi-wave’.
Why consumption is important?
Demand is unlimited people’s wants. Potential consumers make up a market, which are people with both the desire and the ability to buy specific products. All markets ultimately are people. There are three factors which affect demand. (Ken, 2002)
* Price of goods
The price of a good is the most influential factor consumer’s take into consideration. If the prices of some goods go down, this means that there is more money in a budget to be spent on other goods. However, if prices of goods rise there is less to spend on other goods. It is by this reasoning that the prices of other unrelated goods will have an effect upon the demand for any product.
In general terms, when the public’s income rises this influences consumer’s demand. People, who have low incomes, often buy products which they consider to be inferior to other products, which they would prefer, but cannot afford.
Taste is the most important influence of consumer’s demand. Tastes include the value from people’s ideas, quality of goods, fashion, morality and straightforward preferences. For example, many people will not buy products which are made in certain countries where human rights are abused (2002, Ken)
The way for estimating demand
*New Zealand Unemployment rate
The graph shows that the unemployment rate has increased over the years. Low unemployment is often also associated with improving wages and working conditions, as employers compete to attract and retain workers.
On the other hand workers who become unemployed are liable to stop spending which can lead to a down turn in the economy (Sloman &Boer, 2009).
*GDP (Gross domestic product)
Bollard goes on to say, this month the economy is recovering from a recession that ended in the second quarter of last year, buoyed by rising consumer confidence and spending. Confidence surged to a...