A consumer is someone who purchases a product or service for individual use. The decision to buy a product or service involves many factors. When consumers increase or reduce the amount of products or services they buy; it creates ripple effects in the economy.

Choices

Consumers select products according to many factors, not just price. The deciding factors might be quality of customer service, product availability and/or product selection.

Protections

Watchdog groups (for example, the Better Business Bureau) and government entities (FBI) protect consumers from fraudulent companies and scams.

Spending

Consumer spending decreases during periods of recession. When fewer people are employed, there is more saving than spending. During prosperous times, consumers have more disposable income, so they spend more.

Economics

When consumers spend less money, economists use this, along with other factors, to determine the stability or instability of the economy. According to the Hoover Institution at Stanford University, 70 percent of the economy is dependent upon consumer spending.

Effects

When consumers spend less money, companies cut operational costs (employees, for example) because there is less revenue. When this occurs on a wide scale, other companies are affected, and the unemployment rate increases.

Source:

Personal income & outlays

Consumer Expenditure Survey

Facts on Policy: Consumer Spending

Resource:

U.S. Department of Commerce: Bureau of Economic Analysis (BEA)

Bureau of Labor Statistics (BLS)

Hoover Institution: Stanford University