The Influence of Consumer Choice on Economy

Consumer choice is a major driving force in the factors influencing various outcomes concerning microeconomics. This is well known and numerous companies attempt to harness this knowledge for profit, but it remains difficult to fully account for the tastes that can make up the complexity of consumer choice.

Impact

It is clear from numerous studies and polls that consumer choice heavily dictates purchases and economic transactions. As demand for an item increases, often irrelevant of the cost (to a point), as certain trendy fashions or advertisements can convincingly sway the masses to purchase something that might otherwise be considered illogical. On the other side of the spectrum, low enough prices will influence consumers to buy something that may not be the best or healthiest option. The lower in price an object becomes, the higher the demand rises. But consumer choice is never so neat and simple, which is why many brands are favored over others, even if they are quite similar. Grocery chains offer in-house brands that some consumers will never even try, despite a lower price, due to an aesthetic or belief that the lower price makes the product inferior. In a very real way, even though consumer choice drives the market, it is rarely tidy or logical, going in multiple directions at once and changing quite often.

Decisions and Influence

Additionally, wages can be driven up by consumer choice. Professions are much like brands, as well as firms within those professions; not all are considered equal by consumers, and a shift towards one will drive those related wages up, and lower those in the neglected firms. Another facet of this is interest rates: as multiple people choose one recreational activity that poses a higher risk than others, the overall rate for consumers of those affected companies will rise accordingly. This does not necessarily correlate with the direct danger level of said activity, merely that the more people do a given activity, regardless of its safety margin, more people will get hurt. One facet of consumer choice that is interesting is when it comes to overall health, particularly with regards to consumed goods. “It stands to reason that these consumers' food choices would be affected by an erroneous belief in a particular chosen item's nutritional content, since it would affect how they prioritize their food consumption preferences.”

Asymmetric Information

Critical to understanding the precariousness of the large majority of the economic systems currently in place is fully realizing the relevance that asymmetric information has, particularly with the loaning and borrowing that is much of the economic infrastructure. Not all of the accounting and auditing that occurs at any point transaction can conceivably be tracked, particularly in light if the fact that a large number of goods are divisible and non-storable. “….institutions such as commodity money, credit, and record-keeping cannot be used to facilitate exchange, which leaves fiat money as the only medium of exchange”. This predicates that much of the loaning system in its existing form is somewhat flawed for long-term purposes, at least notionally and in theory, as it simply is lacking vital pieces of information on buyers and consumers that are either feasibly unobtainable or cost more resources to track down than they are worth. From a practical standpoint, it is working, yet it does offer insight as to why cryptocurrency has become so successful and popular in the last few years, as in much the same way that a government can decree legal tender is worth x amount, users and the system as a whole dictates the cost of cryptocurrency without governmental interference, and is distinctly storable.

Political Economy

Political choices are not excluded from the consumer’s choice irrationality. A phenomenon known as Condorcet’s paradox is implicit in determining that despite having vastly different preferences, overall the preferences of voters in any given election are cyclical. “Individual preferences are regarded as being determined ‘outside’ the social choice process, thus as ready-made inputs that remain constant during the process of making a social choice”. Similarly Arrow’s Impossibility theorem dictates that basically in any given voting system with multiple options, the government simply cannot offer choices to please everyone.

Conclusions

Market forces are perpetually driven by consumer choice, and the multi-faceted approach to this is well-documented and understood, yet it still is such an intangible and fickle entity that while it can be predicted and even influenced to a degree, it can never be fully accounted for, and consumers will always make arbitrary, almost irrational choices that can be tracked down to their origins, but by then the forces dominating and resulting from these choices have already been enacted.