Factors Affecting Consumer Retail Spending in UK

Economics for
Business
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Executive Summary
UK is socialistic market economy which normally operates with the free interactions of
market forces. Only when government finds some unusual activity that it intervenes. UK
is facing from economic losses induced due to Covid-19 restrictions and lock-down. This
report has been prepared with two main objectives: First, to find out various factors that
has an effect over consumer behaviour in retail spending and second objective is to, find
out various economic policies and programs that have been put in place by UK
government to aid its economy and consumers to recover from economic losses.
In first section, demand and supply law has been discussed and various
determinants of demands as well as the factors inducing demands are also discussed.
Factors such as income effect, government intervention, local demographic factors,
elasticity of demand etc. are discussed. In second section, various policies and packages
announced by UK government to help its economic environment deal with the pressure
created by lock-down and restrictions that were put in place due to coronavirus crisis are
mentioned. Poverty programs aided by government, various transfers made by it,
stimulus packages announced by it and different industry-specific measures taken by it
are discussed.
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Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Task 1...............................................................................................................................................4
Main factors determining positive and negative shifts linked to changes in consumer retail
spending.......................................................................................................................................4
Task 2.............................................................................................................................................10
Main UK government and economic policies to influence consumer spending.......................10
Conclusion.....................................................................................................................................12
References......................................................................................................................................14
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Introduction
Consumer spending includes total money that are spent by individuals and
households on final goods and services in an economy while retails sales in an economy
tracks the consumer demand for finished goods over a specified period of time (Fulgoni
and Lipsman, 2016). It forms the basis of demand driven economy. Any significant
fluctuation in consumer spending on retail goods and services is able to generate
significant impact on the whole economy. One such fluctuation was brought in by the
coronavirus pandemic and the resulting decrease in consumer spending in UK because of
it, forms the basis of this report discussion. Positive and negative shift in consumer
demand are discussed using supply and demand analysis. Also, discussed below are the
steps taken by UK government to influence and induce the consumers to spend more, so
that economy can stabilise.
Task 1
Main factors determining positive and negative shifts linked to changes in consumer
retail spending
Economy of the United Kingdom is a market-oriented social economy i.e. decisions
regarding production, distribution and investment are determined by the forces of demand
and supply but government intervenes, when there is a need to stabilise the economy.
Demand and supply function
Core of economics is based on the fact that resources are scarce and limited and
therefore, to gain something, one must lose alternative which is called opportunity cost.
Consumers therefore, have to compare the costs and benefits of alternatives before
making marginal decision (Thirlwall, 2015). For this, they usually prefer products which
provides them some incentives over their alternatives. It could be either monetary benefit
or some other qualitative benefits. Other side than consumer demand is supply from
producers. Mostly markets are perfect competition i.e. large numbers of buyers and
sellers. Since, the consumer has variety, they tend to choose the best. That’s why most of
the producers prefer specialisation to gain competitive advantage over other traders.
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