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Explain why the role of a consumer is important in an economic system.

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Julianne Hansen, M.A. eNotes educator | Certified Educator

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Because most people have limited financial resources, they must constantly make choices about where they will spend their money. Each time they make a purchase, they become a consumer of some type of good(s).

These purchases can be thought of as little votes that each person makes, one transaction at a time. If I spend $5 on a coffee from a local coffee house instead of a large coffee chain, I am then "voting" with my money on the best place to drink coffee.

These little economic consumer votes add up. If lots of people give their money to the small coffee shop, it will thrive and be successful. If people instead give their money to the big chain coffee store, the small business will likely have to close its doors.

Consumers, then, have lots of power in our economy. They decide through each individual transaction which products and businesses will thrive and which ones will collapse. These changes happen over long periods of time, and business which see many consumers today may not see them 5 years from now if they don't pay attention to the ways their clients' needs change over time. All of us can likely think of some retail giants who were incredibly successful in the past but who are now bankrupt and closed because consumers stopped giving them the money they needed to remain in business.

It is also worth noting that when consumers as a whole are spending lots of money on luxuries (vacations, high-end clothing, boats, etc), they are reflecting that they have a high level of confidence in their economy. When consumers stop spending and begin saving more, it reflects that they believe the economy is in trouble. Sometimes just the idea that the economy is in trouble is enough to make people spend less—which then makes the economy take a dive. Consumer confidence is key to a thriving economy.

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Ashley Kannan eNotes educator | Certified Educator

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The consumer dictates so much of an economic system.  Their role is significant.  As previously stated, they determine the demand for a product.  This becomes essential for without the consumer, issues of supply are thrown into complete limbo as there is a lack of direction.  Additionally, a consumer's ability to spend helps to determine cost.  Businesses don't do themselves any favor when price controls are constructed without taking the consumer's ability to spend into account.  Through the consumer's purchasing power, the entire notion of business is accomplished and without the consumer, this important aspect of the exchange of goods and services is lacking.

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besure77 eNotes educator | Certified Educator

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A consumer is an individual who buys products or services for personal use and not for manufacture or resale. A consumer is someone who can make the decision whether or not to purchase an item at the store, and someone who can be influenced by marketing and advertisements. Any time someone goes to a store and purchases a toy, shirt, beverage, or anything else, they are making that decision as a consumer.

Basically, without consumers there would be no economic system. Without consumers to purchase the goods, there would be no demand for the goods. This has an effect on the entire economic system as well. It includes everything from the product itself to marketing.

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pohnpei397 eNotes educator | Certified Educator

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The role of a consumer (or of consumers in general) is important in an economic system because it is consumers who demand goods and services.  When they do this, they make it so that other people can have jobs making the goods and services the consumers want.

You can see how important consumers are by looking at our own economy today.  Consumer spending on goods and services makes up close to 70% of the GDP of the United States.  If consumers did not demand these goods and services, many people would be out of work.

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