3.2 Households Flashcards
Define consumption
The buying of goods and services
Define consumer expenditure
money spent on consumption
List 4 factors affecting consumption
- Disposable Income
- Wealth
- Consumer Confidence
- Interest Rates
Explain how disposable income affects consumption
the more the disposable income, the more people consume
Explain how wealth affects consumption
the more wealthy a person is, the more he spends
Explain how consumer confidence affects consumption
if consumers are confident of keeping their jobs and their future incomes, then they might be encouraged to spend more now, without worries
Explain how interest rates affects consumption
if interest rates provided by banks on saving are high, consumers might save more so they can earn interest and thus consumer expenditure will fall
Define saving
income not spent or delaying consumption until some later date
List 4 factors affecting saving
- Saving for Consumption
- Disposable Income
- Interest Rates
- Consumer Confidence
Explain how saving for consumption affects saving
people save so that they can consume later
Explain how disposable income affects saving
if the amount of disposable income people have is high, the more likely that they will save
Explain how interest rates affects saving
people also save so that their savings may increase overtime with the interest added
Explain how consumer confidence affects 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
