TEXT D
A scientist who does research in economic psychology and who wants to predict the way in which consumers will spend their money must study consumer behavior. He must obtain data both on the resources of consumers and on the motives that tend to encourage or discourage money spending.
If an economist were asked which of three groups borrow must people with rising incomes, stable incomes, or declining incomes—he would probably answer: those with declining incomes. Actually, in the years 1947 -1950, the answer was: people with rising incomes. People with declining incomes were next and people with stable incomes borrowed the least. This shows us that traditional assumptions about earning and spending arc not always reliable. Another traditional assumption is that if people who have money expect prices to go up, they will hasten to buy. If they expect prices to go down, they will postpone buying. But research surveys have shown that this is not always true. The expectations of price increases may not stimulate buying. One typical attitude was expressed by the wife of a mechanic in an interview at a time of rising prices. "In a few months," she said, "we’ll have to pay more for meat and milk; we’ll have less to spend on other things." Her family had been planning to buy a new car but they postponed this purchase. Furthermore, the rise in prices that has already taken place may be resented and buyer’s resistance may be evoked. This is shown by the following typical comment:" I just don’t pay these prices; they are too high."
Traditional assumptions should be investigated carefully, and factors of time and place should be considered. The investigations mentioned above were carried out in America. Investigations conducted at the same time in Great Britain, however, yielded results that were more in agreement with traditional assumptions about saving and spending patterns. The condition most conducive to spending appears to be price stability. If prices have been stable and people have become accustomed to consider them "right" and expect them to remain stable, they are likely to buy. Thus, it appears that the common business policy of maintaining stable prices with occasional sales or discounts is based on a correct understanding of consumer psychology.
The example of the mechanic’s wife is intended to show that in times of rising prices______.