How E-Commerce Influences Consumer Choice
This lesson printed from:
Posted April 29, 2004
Grades: 3-5, 6-8
Author: Council for Economic Education Technology Staff
Posted: April 29, 2004
Updated: May 19, 2009
In this lesson students learn decision making skills that will help them become better consumers. As consumers they have a variety of alternatives from which to choose. They learn about the importance of price information in making their decisions. First, students gather information on different brands of athletic shoes and determine which one is the best buy for them and explain why. Then, students identify a toy or game they would like to buy. To help determine where to purchase their toy or game, students gather information from a store, a catalog, and three websites. Finally, students conduct interviews to determine the extent to which adults in their community use e-commerce. They draw generalizations from their data and send a report of their findings to the adults who were interviewed.
- Explain how information about prices influences consumers.
- Explain how consumer choice reflects decisions based on personal values, financial constraints and wants.
- Give examples of goods and services and their available substitutes.
- Describe the role of e-commerce in today's marketplace.
Introduce the main points of the lesson: This lesson focuses on the decision-making skills of the consumer. With many goods and services, consumers have a variety of alternatives from which to choose.Yet, it is often difficult for consumers to imagine finding a substitute for a product or service they regard as a necessity. However, if prices for various products rise relative to those of substitutes, consumers begin looking for alternatives. As consumers make decisions, the price of a good or service relative to available substitutes becomes a very important factor.
The concept of substitutes, or alternatives, gives us helpful information about consumer behavior. In discussing the concept of substitution, it is important to remember that consumers are always seeking to maximize benefits relative to costs.
Awareness of the wide range of alternative goods and services available to consumers and businesses should help them to make intelligent choices. Consumers can use many sources to find information about prices of alternative goods and services -- stores, newspapers and television advertisements, catalogs, and e-commerce.
The buying and selling of goods and services using the internet is called e-commerce. In 1999, 17% of the 39 million households in the United States shopped on line and nearly half of them spent $500 or more. E-commerce is thought to be the wave of the future in retail sales, but the extent of its impact is subject to speculation.
Some speculate within a few years the internet sales could account for 5 percent of America's retail sales and have an impact similar to that of the Sears Roebuck catalog when it was first introduced in 1888. Today, catalogs account for about 10% of all retail sales in America.
Tell students they are considering the purchase of a new pair of athletic shoes. Direct them to complete the worksheet. Ask students what influenced their rankings. [Many will mention brand name recognition or that they currently own a particular brand of shoes. Some will be influenced by print or television advertising.] Tell students that one factor that influences consumer spending decisions is price. Instruct students to use the websites listed below (these are also listed in the worksheet) to locate the price for each brand name shoe they wish to purchase and write the price in the chart. Suggested websites are:
New Balance Footwear
Kellys Running Warehouse
Tell the students to use the price information to rank the brand names again.
1. Did your rankings differ? Explain. [If there is a variation in price, some students' rankings will differ. If consumers are not convinced that an item more expensive than others is worth the difference in price, they will substitute a lower-priced item for the more expensive one. This will occur even though the less expensive item initially may not be as desirable to the consumer. If there is little difference in price, student rankings may not vary much.]
2. If there is little difference in price, on what do consumers base their decisions? [Consumers buy the brand they have always bought, based on a recommendation from a family member or friend or based on information from an advertisement, buy what friends buy, buy based on the location of the store and ease of purchasing the good or service.]
3. Why is knowing the price of the shoes you would like to buy important? [Consumers try to maximize their satisfaction relative to the amount of money they have to spend. Prices help consumers determine how much they gain and how much they give up when they make a choice. If they buy the cheaper brand, they can use the money they saved to purchase something else or save it. By checking out all the various prices, consumers can decide which pair of shoes is more satisfying for them to buy.]
4. Why do consumers substitute less expensive goods for more expensive goods? [When prices begin to go up, consumers look for other products that are cheaper and that satisfy their want. By substituting the less expensive product, consumers can make their income go further.]
Tell students that they have been saving their allowance to buy a new toy or game. Instruct them to go to one of the following websites to find a specific toy that they would like to buy.
Fat Brain Toys
Toys 'R' Us
Tell students to write the name of the toy or game they wish to buy in the space provided in the Toy Survey. Instruct them to fill in the Toy Survey with information they gathered from the website. Explain to students that to make an informed decision, they need to gather information from two other websites, a local store and a catalog and complete the Toy Survey. Tell students to use the information from their chart to select the location where they want to buy their toy or game.
1. Where would you buy your toy or game? How did price influence your decision? [If prices vary, some students will buy at the location with the lowest price.]
2. How might the amount of the time needed to purchase an item influence your choice? [Many students will purchase at the location that requires the least amount of time.]
3. What other factors influenced your choice? [Tax or shipping costs, the ease with which the toy or game could be returned, ability to try out the product all are factors that can influence the choice.]
Explain to students that e-commerce is a term used to describe the buying and selling of goods and services on the internet. E-commerce is growing. More and more people are buying and selling goods using the internet. In 1999, 39 million households shopped on line and nearly half of them spent $500 or more.
1. How do you think e-commerce might influence people in the way they purchase items? [The number of people purchasing items on line will increase.]
2. How do you think this influence on consumers might influence local stores or small businesses? [They could lose customers as more consumers begin to shop online.]
3. What advice would you give these store owners who have lost customers to the internet? [Establish their own website, provide more and better service for their existing customers, advertise the advantages of shopping at a local store.]
Inform students that they are going to conduct a survey of at least 5 to 10 adults to determine how many adults in their community shop on line. Students should complete a separate survey form for each adult interviewed. Have students write a summary of their findings and share the summaries with the class. Ask students what generalization they can make about the use of e-commerce by the adults in their community? [Answers will vary.] Have students write thank you letters to the individuals who participated in the surveys. Each letter should include a summary of their findings.
Price influences consumers in the decisions they make. Consumers will substitute a lower priced item for a more expensive item if they feel the more expensive item is not worth the difference in price. When prices go up, consumers look for other products that can be substituted that are cheaper and still fulfill their wants. Through substitution, consumers make their incomes go farther. If there is little variation in price, consumers base their decisions on habit, brand name recognition, advice from friends and family, and advertisements. With e-commerce, the buying and selling of goods and services on the internet, the number of consumers purchasing items online is increasing. E-commerce provides consumers with another source of information when determining the best place to purchase a good or service.
Assessment of student learning in this lesson focus on the students' answers to the worksheets and flash activities in Part 1 and Part 2, as well as the participation and discussion in Part 3.
1. Your friend has been saving his allowance and money earned by doing chores. He wants to buy a CD player. Your friend has asked you to help him. Using what you have learned in this lesson, what advice would you give him and why? [I would tell him to look on the internet, in catalogs and local stores and gather information on price, amount of tax, shipping costs (if applicable), return policy and other discounts. I would explain to him that with this information, he can determine the CD player that gives him the greatest satisfaction at the best price.]