Which of the following is true about consumer behavior during economic contraction?

During economic contraction, consumer behavior is significantly influenced by factors such as decreased confidence, rising unemployment, and uncertainty about future economic conditions. As a result, consumer spending tends to decrease.

During these periods, individuals generally prioritize essential expenditures over discretionary spending, leading to a reduction in overall consumption. This behavior is primarily driven by a desire to save more due to concerns about job security and economic stability.

Consequently, categories such as luxury goods and non-essential services are often the first to experience reduced spending, as consumers become more cautious and strategic in their financial decisions. The focus shifts toward fulfilling basic needs and maintaining financial security, which contributes to the decline in spending. Thus, understanding consumer behavior in the context of economic downturns is crucial for analyzing broader economic trends and potential recovery strategies.