The main objective of this study is to utilize an engineering concept in order to propose a mathematical model to correlate consumer spending, utility and income. The difference between the proposed model and the Keynesian consumption theory is explained by the fact that the Keynesian consumption theory takes into account the consumption of costumers with no income. The effects of marketing, bank loans and credit debt on consumer spending are also analyzed using the general equation of transport phenomena and mathematical models are presented for the first time. Based on a case study, marketing has increased the utility (driving force) by 61%. Taking into account the theory of consumption smoothing, bank loans also provide the consumer with additional spending power by decreasing the resistance for consumption. In case of excessive debt, customers might spend the money only to buy the “utility” in order to be able to repay the debt. In this situation, the effects of debt are described in the proposed engineering model as a decrease in income (extra resistance to spend money).
Table of Contents
1. Dynamic Systems & their Universal Law
2. Gross domestic product and consumer-based economy
3. Proposed engineering model for consumer spending
3.3 Effects of marketing and bank loans on consumer’s spending
4. Effects of marketing on consumer spending
5. Effects of bank loans on consumer spending
6. Effects of marketing and bank loans on consumer’s spending
7. Effects of credit debt on consumer spending
8. Proposed Mathematical models and Analysis
9. Conclusion
Research Objectives & Key Themes
This study aims to translate fundamental engineering concepts of transport phenomena—specifically flow, driving force, and resistance—into a mathematical framework to analyze consumer behavior, illustrating how marketing, bank loans, and debt influence the flow of money within a consumer-based economy.
- Application of the transport phenomena framework to economic systems
- Mathematical modeling of consumer spending via utility and income
- Analysis of how marketing increases the "driving force" of consumption
- Evaluation of bank loans as a reduction in "consumption resistance"
- Assessment of credit debt as an increase in "financial resistance"
Excerpt from the Book
1. Dynamic Systems & their Universal Law
Everything in the universe is continuously in motion and the object can be as small as an atomic particle or as large as a planet. Gravitational and electromagnetic forces are responsible for large objects to be in motion while weak and strong nuclear forces are the driving factors for the quantum world to be in continuous motion. From an engineering perspective, flows take place in dynamic systems due to a driving force within the system and are controlled by a resistance located between two poles of the system. According to the second law of thermodynamics, this driving force is the difference in concentrations of energy between the two poles. For example, heat transfer in a piece of metal is transported from a higher temperature to a lower temperature and the speed of the flow of heat transfer is controlled by the resistance of the metal to heat transfer. The rain falls from the sky (higher altitude) to the land (lower altitude). Without the resistance of air to the gravitational force, rain drops will destroy all the trees and vegetation. This universal phenomena could therefore be described using the following generalized relationship for transport phenomena:
Summary of Chapters
1. Dynamic Systems & their Universal Law: Establishes the foundation of the study by introducing the physical concept of transport phenomena (flow, driving force, and resistance) as a universal principle.
2. Gross domestic product and consumer-based economy: Defines the economic context of the study, detailing how GDP is calculated and the central role of consumer spending in modern economies.
3. Proposed engineering model for consumer spending: Presents the initial transition from traditional economic consumption functions to a new model rooted in engineering principles.
3.3 Effects of marketing and bank loans on consumer’s spending: Examines the combined impact of marketing and credit access on the spending behavior of consumers.
4. Effects of marketing on consumer spending: Analyzes how marketing strategies function as an added driving force that stimulates impulse buying and overall consumer demand.
5. Effects of bank loans on consumer spending: Explores the role of bank loans in decreasing consumption resistance, allowing consumers to maintain spending patterns over time.
6. Effects of marketing and bank loans on consumer’s spending: Investigates the synergy between promotional efforts and financial facilitation in driving market outcomes.
7. Effects of credit debt on consumer spending: Discusses how excessive debt acts as an added resistance to spending, negatively impacting future consumption capability.
8. Proposed Mathematical models and Analysis: Consolidates the findings into a set of mathematical equations that provide a unified framework for measuring the studied economic factors.
9. Conclusion: Summarizes the study as a novel attempt to bridge engineering concepts with economic theory to better correlate utility, income, and spending.
Keywords
Engineering concept, Transport phenomena, Consumer spending, Utility, Keynesian consumption theory, Marketing, Bank loans, Credit debt, Disposable income, Driving force, Resistance, Economic modeling, Impulse buying, Consumption smoothing, Financial flow
Frequently Asked Questions
What is the core purpose of this study?
The study aims to apply the engineering concept of transport phenomena—characterized by flow, driving force, and resistance—to develop a new mathematical model that explains consumer spending behavior.
What are the primary factors influencing consumer spending in this model?
The model focuses on "utility" as the driving force, income as the conductance, and the inverse of income as the resistance, while incorporating variables for marketing, bank loans, and debt.
How does this model differ from the Keynesian consumption theory?
Unlike the Keynesian theory, which accounts for autonomous consumption (spending by those with no income), the proposed model assumes that consumption ceases when the resistance (inverse of income) becomes infinite, implying zero income leads to zero spending.
What research methodology is employed?
The author uses an interdisciplinary methodology, mapping physical laws of thermodynamics and electricity (like Ohm’s Law and Fourier’s Law) onto economic data sets to derive new spending equations.
How does marketing impact consumer behavior in this framework?
Marketing is modeled as an additional driving force that increases the consumer's "utility," thereby stimulating higher rates of spending, particularly through impulse purchases.
What effect do bank loans have on the consumer?
Bank loans act to decrease the resistance for spending, providing consumers with temporary additional power that facilitates consumption beyond their immediate income.
How is debt represented in the author's mathematical model?
Debt is modeled as an increase in resistance or a decrease in effective income, which forces consumers to prioritize debt repayment over utility-driven spending.
Can this model predict the impact of marketing on sales volume?
Yes, the model indicates a positive correlation between media spending and sales volume, confirming that the "driving force" of marketing successfully enhances the supply side of the economy.
- Citar trabajo
- Dr. Zin Eddine Dadach (Autor), 2019, Effects of marketing, bank loan and credit debt on consumer’s spending. Mathematical models based on an engineering concept, Múnich, GRIN Verlag, https://www.grin.com/document/458100
