Economics

Nithya Devi Pramekumar

25912240

Economics Assignment

2/5/14

According to the article, what factors have caused buying behavior to shift towards the internet? Is internet shopping causing the demise of established retail shops in Australia? Explain using demand, supply and elasticity concepts.

The spread and growth of the internet, which in turn caused an increase in online marketing, coupled with innovation in technology, as well as development in electronic fund transfer and electronic data interchange, are some of the factors that have increased the traffic of online shoppers. Bank surveys indicate that there are two major reasons that have caused a shift in buying behavior towards the internet. The first being the increase and/or enhancement in security of online payment options, and second is the overall gain in access to online payment methods such as debit/credit cards, bitcoins, and other payment options. The advances in payment options and methods, as well as the increase in overall safety features have heightened consumer confidence in online shopping. Hence more and more people have started to buy online.

According to the Transaction Cost Economics Model, consumers will choose a form of transaction with the lowest transaction cost. Therefore in terms of online shopping, the fact that a consumer can purchase a good or service without having to incur the transaction costs involved of leaving the home to conduct the transaction, (gas, transportation costs) going to the automated teller machine to withdraw the cash needed for the transaction, and the eliminated cost of parking definitely makes internet shopping more appealing. Furthermore, when the value of the time spent seeking the product, can be diminished at the click of a finger and the automated transfer of payment, without the need for physical cash, the convenience in itself makes online shopping preferred by most individuals. In reality, one of the major determinants’ of making purchases...