In economics, the difference between the total amount consumers would be willing to pay to consume the quantity of goods transacted on the market and the amount they actually have to pay for those goods. The former is generally interpreted as the monetary value of consumer satisfaction. The concept was developed in 1844 by the French civil engineer Arsène-Jules-Étienne-Juvénal Dupuit (1804–1866) and popularized by Alfred Marshall. Though economists adopted a nonquantifiable approach to consumer satisfaction in the 20th century, the concept is used extensively in the fields of welfare economics and taxation.
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Movement or policies aimed at regulating the products, services, methods, and standards of manufacturers, sellers, and advertisers in the interests of the buyer. Such regulation may be institutional, statutory, or embodied in a voluntary code accepted by a particular industry, or it may result more indirectly from the influence of consumer organizations. Governments often establish formal regulatory agencies to ensure consumer protection (in the U.S., e.g., the Federal Trade Commission and the Food and Drug Administration). Some of the earliest consumer-protection laws were created to prevent the sale of tainted food and harmful drugs. The U.S. consumer protection movement gained strength in the 1960s and '70s as consumer activists led by Ralph Nader lobbied for laws setting safety standards for automobiles, toys, and numerous household products. Consumer advocates have also won passage of laws obliging advertisers to represent their goods truthfully and preventing sales representatives from using deceptive sales tactics. Consumer advocacy is carried on worldwide by the International Organization of Consumers Unions (IOCU).
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Measure of living costs based on changes in retail prices. Consumer price indexes are widely used to measure changes in the cost of maintaining a given standard of living. The goods and services commonly purchased by the population covered are priced periodically, and their prices are combined in proportion to their relative importance. This set of prices is compared with the initial set of prices collected in the base year to determine the percentage increase or decrease. The population covered may be restricted to wage and salary earners or to city dwellers, and special indexes may be used for special population groups (e.g., retirees). Such indexes do not take into account shifts over time in what the population buys; when modified to take subjective preferences into account, they are called constant-utility indexes. Consumer price indexes are available for more than 100 countries.
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Any tangible commodity purchased by households to satisfy their wants and needs. Consumer goods may be durable or nondurable. Durable goods (e.g., autos, furniture, and appliances) have a significant life span, often defined as three years or more, and consumption is spread over this span. Nondurable goods (e.g., food, clothing, and gasoline) are purchased for immediate or almost immediate consumption and have a life span ranging from minutes to three years. Seealso producer goods.
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Short- and intermediate-term loans used to finance the purchase of commodities or services for personal consumption. The loans may be supplied by lenders in the form of cash loans or by sellers in the form of sales credit. Installment loans, such as automobile loans and credit-card purchases, are paid back in two or more payments; noninstallment loans, such as the service credit extended by utility companies, are paid back in a lump sum. Consumer loans usually carry a higher rate of interest than business loans. Seealso credit.
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Organization owned by and operated for the benefit of those using its services. Cooperatives have been successful in such fields as the processing and marketing of farm products and the purchasing of other kinds of equipment and raw materials, and in the wholesaling, retailing, electric power, credit and banking, and housing industries. The modern consumer cooperative traces its roots to Britain's Rochdale Society of Equitable Pioneers (1844); the movement spread quickly in northern Europe. In the U.S., agricultural marketing cooperatives developed in rural areas in the 19th century; other contemporary examples include consumer and housing cooperatives. Seealso credit union.
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In free market or capitalist economies, consumers are presumed to dictate what goods are produced and are generally considered the center of economic activity. Individual consumption of goods and services is primarily linked to the consumer's level of disposable income, and budget allocations are made to maximize the consumer's marginal utility. In 'time series' models of consumer behavior, the consumer may also invest a proportion of their budget in order to gain a greater budget in future periods. This investment choice may include either fixed rate interest or risk-bearing securities. ....
Concern over the interests of consumers has also spawned much activism, as well as incorporation of consumer education into school curricula. There are also various non-profit publications, such as Consumer Reports and Choice Magazine, dedicated to assist in consumer education and decision making, and Consumer Direct in the UK.