The primary determinants include:
1. the price of a product
2. the household's income
3. the household's accumulated wealth
4. the prices of related products
5. the household members' tastes and preferences
6. the households expectations about the future
REALITY CHECK: Heres an example. Suppose that a member of your household is thinking about buying a new pair of skis. People are more likely to buy new skis if they are on sale than if they are not (price is a factor). The amount of take-home pay will also play a role. People are more likely to buy when they have just gotten a high-paying job than if they have been laid-off (income is a factor). Similarly, it is more likely that someone will buy if he or she has just inherited a large chunk of change from Aunt Zelda or if his or her stock portfolio has risen in value (wealth is a factor). Because new bindings, poles, and boots are also necessary to go along with new skis, one is less likely to buy skis if these related products are very expensive than if there is a great deal on them (the prices of related goods are factors). Finally, people will buy new skis if they love skiing and are expecting a great season (tastes, preferences, and expectations are factors).
To read about the importance of consumer confidence in the economy, consult the current events articles on the companion web site.