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Consumer Economics

Terms in this set (41)

Externalities are the effects of one individual's actions on the well-being of somebody else who did not chose to incur that cost or benefit. Externalities can be positive or negative. The bystander benefits from a positive externality but incurs a cost from a negative externality. An example of a negative externality is pollution. An example of a positive externality is education. Educated individuals are generally more productive workers. Moreover, educated citizens are well-informed and active workers. They help the society in some way. Government can implement policies that will encourage positive externalities.

Public goods benefit everyone, especially in the geographic area when they are produced, irrespective of whether those people pay for it or not. People cannot be stopped from using these public goods. One person's use of a particular public good does not reduce another person's ability to use the good. Public goods are non-excludable and non-rival in consumption. For instance, when the fire alarm rings it is impossible to prevent any person from hearing it (non-excludable). If one person benefits from the warning, that person does not reduce the benefit to anyone else. Common examples of public goods include defense, public parks, clean air, and so on.

A recession is a slowdown in economic activity (production and consumption). A decline in the economic growth for two consecutive quarters depicts recession in that economy. Declining economic growth leads to a fall in gross domestic product (GDP) of the economy. Because consumption has decreased, a fall in GDP results in higher unemployment, which in turn leads to financial hardships.
Impact on culture: International trade not only exports and imports services but also causes an exchange of cultures between countries. For example, US music, movies, food, and clothes are popular in many other countries. Many of the youth in these countries are interested to adopt these cultural exports due to their liking for the US lifestyle. Due to globalization, along with goods and services, cultures are also appreciated internationally.

Impact on lifestyle: With increasing international trade, consumers' lifestyles are also changing. The global standard of living has increased. Earlier, luxuries were reserved only for rich consumers. But with globalization, more consumers can now afford different luxury goods and services at affordable prices. Additionally, fashion or the need to be updated pressures consumers to buy not for need but for style.

Impact on environment: With an increase in international trade, environmental issues are also increasing. Most of the natural resources are quickly being depleted due to extensive use. Moreover, the process of globalization had led to more industrialization in many emerging economies. While developed nations are implementing methods to protect the environment, emerging nations have not yet reached this point. Thus, their actions keep harming the environment.

Impact on technology: The development in technology has helped the service industry. For example, different network providers all over the globe have made communication less expensive. The growing technology helps in saving time and is very convenient. The Internet and market research methods have made marketing and advertising a science that allows companies to know more about their target markets. Buying a product manufactured in a different country is easy with the help of the Internet.