• Consumer Confidence:
– Consumers’ beliefs about what the future holds
• Overall savings rate influenced by:
– (1) Individual consumers’ pessimism or optimism about their personal circumstances
Chapter 12
Income and Social Class
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Chapter Objectives
When you finish this chapter you should understand why:
• Both personal and social conditions influence how we spend our money.
• Social Class Affects Access to Resources:
– (2) World events – (3) Cultural differences in attitudes toward saving
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Social Class
• A Universal Pecking Order
– Dominance-submission hierarchy: Each individual in the hierarchy is submissive to those higher in the hierarchy and is dominant to those below them in A Higher Living Standard
• Education is strongly linked to a higher standard of living. People who earn a college degree are likely to earn much more during their lives than those who do not.
segment of working people
– Yes, It Pays to Go to School!
• Education is expensive but pays off in the long run
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Luxury Items as Status Symbols
• Luxury items like diamond engagement rings are valued as status symbols the world over, as this Brazilian ad for a jeweler reminds us.
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Attitudes Toward Money
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Consumer Confidence
• Behavioral Economics (a.k.a. economic psychology):
– Concerned with the “human side” of economic decisions
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Consumer Spending and Economic Behavior
• Status Symbols:
– Products that serve as markers of social class
• Income Patterns
– Woman’s Work
• More people participating in the labor force • Mothers with children are the fastest growing
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Opening Vignette: Phil
• How would you describe Phil’s social class? • Upon learning that the Caldwell’s “have
money,” what stereotypes did Phil have about families with high income? • How did his experience with the Caldwell estate differ from his preconceptions? • What lesson can we learn from Phil’s experience?
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To Spend or Not to Spend, That is the Question
• Discretionary Spending
– Discretionary income: The money available to a household over and above that required for a comfortable standard of living
– Individual Attitudes Toward Money:
• Atephobia: Fear of being ruined • Harpaxophobia: Fear of being robbed • Peniaphobia: Fear of poverty • Aurophobia: Fear of gold
• We group consumers into social classes that say a lot about where they stand in society.
• A person’s desire to make a statement about his social class, or the class to which he hopes to belong, influences the products he likes and dislikes.