Consumer Behavior: Basic Assumptions

Introduction

• Socio-economic factors are social and economic conditions shaping the environment for businesses and industries.
• These include cultural values, demographic trends, income levels, and government policies.

The Consumer

• A consumer is an individual acquiring products or services.
• In economics, consumers drive economic activity.
• Consumers are the engine driving the economy.

Assumptions About Consumers Behavior

• Making premature or excessive assumptions can limit one's view of possibilities.
• People make assumptions to avoid excessive burdens in decision-making.

Four Basic Assumptions About Consumers

• Consumers are rational, aiming for optimal outcomes as they perceive them.
• They seek products and services that provide benefits.
• Consumers desire many goods, facing choices every day due to the world's temptations.
• There is no such thing as a free lunch, as goods are never truely free.
• Consumers must weigh costs against benefits.
• Consumers have limited income, impacting their daily decisions.
• Limited income forces them to prioritize and make careful choices.

The Government

• The economic system of a country is complex, incorporating command elements and traditional economics.

Four Types of Government

• Protector: The government enforces laws against false advertising, impure foods/drugs, environmental hazards, and unsafe vehicles.
• Provider & Consumer: Governments at all levels provide goods and services, including defense.
• Regulator: The national government oversees competition in the marketplace including commerce and communications.
• Promoter of National Goals: The government reflects the will of the people and aims for economic goals like freedom, efficiency, equity, and security.

Socio-Economic Impact in Consumer Income

• Income is the money individuals earn from economic activities.
• Disposable income influences spending habits.
• Consumers tend to buy more luxury items when disposable incomes rise.

Taxation and Revenues

• A tax is a mandatory pecuniary burden required to support the government.
• Taxes are imposed by jurisdictions and may be paid in money or labor.
• A tax is not a voluntary donation but an enforced contribution.

Brief History of Taxation

• Taxes evolved with governments.
• Government roles expanded, needing more tax revenue, which caused public resitance.
• According to Rechnquist (1992), the earliest taxation system dates to Ancient Egypt (3000-2800 BC).
• In Ancient Egypt a portion of harvests were collected.
• Ancient Greece had temporary taxes called "diphora" during crises and poll taxes for foreigners "metoikion".
• Ancient Rome introduced customs duties, inheritance, and sales taxes.
• Julius Caesar imposed a 1% sales tax.
• Augustus Caesar increased the sales tax to 4% on slaves and 1% on other goods, creating the inheritance tax for military pensions.
• These practices laid the groundwork for modern global taxation.

Taxation in the Philippines

• The National Internal Revenue Law is the basis for tax law.
• Republic Act No. 8424 is the latest codification, since December 11, 1997
• There are also special laws that handle special tax treatment.

National Taxation

• The 1987 Philippine Constitution limits taxation to ensure fairness.
• Congress develops the progressive system where both the system have to be both uniform and equitable.
• Taxes for a specific purpose can only be used for that purpose.
• Remaining funds go to the general government if the initial purpose is complete.
• Congress authorizes the President to adjust import/export quotas to support development.

Tax Exemptions

• Tax exemptions are limited to those granted by Law.
• The Constitution grants tax exemption on entities such as:
• Charitable organizations, churches, mosques, non-profit cemeteries, and related lands/buildings.
• Non-stock non-profit educational organizations.
• They must be used directly, and exclusively for education or religion.

Local Taxation

• The Constitution lets local governments impose taxes, fees, and charges guided by the Local Government Code.
• A public hearing is requred for new fees.
• They cannot be unjust, excessive, or against national policy.
• Income tax and documentary stamp tax are for national government.

Conclusion

• Taxation is a tool for government funding and regulation.
• This grew from Ancient Egypt and Rome to modern systems.
• The 1987 Philippine Constitution says that there is uniformed and fair taxation.
• Socio-economic factors such as employment rates, inflation, income, and business growth impact industry and revenue.
• Downturns lower consumer spending and revenue collection, while economic growth increases resources.
• Government policies, infrastructure, and stability influence environments, investments, and jobs.