The Impact of Economic Downturn on Peoples Perception of Consumption

Peoples consumption concepts are closely related to income and socio-economic conditions. When facing an economic recession, the recession reflected by the changes in GDP will not only affect the employment rate and the wage rate, but will further affect all kinds of commodities markets. The market can react in advance and minimize their losses if consumers perception of consumption and impacts brought through these changes can be predicted by analyzing economic indicators and trends of the economy. The Vector Auto Regression model will be used in this paper to further analyze different economic indicators that can reflect the changes and relationships of these factors that are affected by the economic downturn. These tools will be applied in this article to explore how factors can be affected by the economy and will further determine the market direction with the change of consumption concept under the trade-off and domination of consumers. Through analyzing the model, this paper concludes that the economic downturn can significantly reduce consumers willingness to buy and instead pay attention to wealth accumulation. The accuracy of the vertical auto regression model used in this paper does not have a high accuracy in analyzing relationships between each variable, thus it may not be the optimal choice to rely on to analyze the economic trend. Further models and variables should be put into consideration.