Economic Behavior of Consumers During Instability

Abstract

The new millennium faced a COVID-19 pandemic and a war in Ukraine, which is much more than a crisis, as these incidents have unpredictably changed our entire way of life. As the analysis of economic sales data showed, this dramatic scenario had a substantial impact on the spending levels of specific categories of consumers. A study of consumers’ economic behavior in times of instability has been conducted to understand these changes better. During a recession, consumers have a strong tendency to change their purchasing behavior because of the financial challenges of unstable conditions. They become more selective and focus only on what they consider necessary for survival. Thus, consumer preferences have changed, the approach to consumption has changed, and initial needs and, above all, security needs have come to the fore. Unstable conditions bring companies many visible problems but far fewer apparent solutions. Therefore, a modern business must consider configurations in consumer behavior in a dangerous environment to function effectively. This study aims to determine the economic behavior of consumers facing instability based on the dependence of psychological and economic factors through regression analysis and a survey. Research methods: comparative analysis; systematization; generalization; survey; regression analysis. Based on the survey, we found that the first reaction of consumers faced with instability is a sharp reduction in costs and the transition to the savings mode. The conducted regression analysis reflects the value of the determination coefficient, indicating that the model explains 60 % of consumers’ economic behavior during instability and explains the change in costs for the items of the first and second necessities. The study found significant differences between “Changes of Spending on Essentials” and “Changes in Spending on Essentials”, t (3832) = 11,99 p < 0,001. We found that spending on essentials increased by 90,66%, while the average increase for second necessities was 36,09 %. The study results provided new evidence regarding the role of psychological factors affecting spending on first and second necessities, expanding our knowledge of previous changes in consumer behavior during instability