3.2 Households Flashcards
(17 cards)
Define disposable income
The income of a person after all income-related taxes and charges have been deducted
Define consumption
The buying of goods and services
Define consumer expenditure
The money spent on consumption
What are 3 factors affecting consumption?
- Disposable income
- Wealth
- Consumer Confidence
How does disposable income affect consumption?
the more the disposable income, the more people consume
How does wealth affect consumption?
the more wealthy a person is, the more he spends.
How does consumer confidence affect consumption?
if consumers are confident of keeping their jobs and their future incomes, then they might be encouraged to spend more now, without worries
Define Saving
income not spent (or delaying consumption until some later date)
What are 3 factors affecting saving?
- Disposable income
- Saving for consumption
- Consumer Confidence
How does disposable income affect saving?
If the amount of disposable income people have is high, the more likely that they will save
How does saving for consumption affect saving?
people save so that they can consume later. They save money so that they can make bigger purchases in the future
How does consumer confidence affect saving?
If the consumer is not confident about his job security and incomes in the future, he may save more now.
Define Borrowing
simply the borrowing of money from a person/institution
What are 3 factors affecting borrowing?
- Interest Rates
-Wealth - Consumer Confidence
How does interest rates affecting borrowing?
When the interest rates rise, people will be reluctant to borrow and vice versa
How does wealth affect borrowing?
banks will be more willing to lend to wealthy and high-income earning people, because they are more likely to be able to repay the loan
How does consumer confidence affect borrowing?
how confident people feel about their financial situation in the future may affect borrowing too
