Changes in consumption expenditure (C)

Question 1

Consumption expenditure

Answer 1

• Consumption household spending on consumer G&S (food, cars, entertainment)
• Fall in consumption, leftward shift
• Rise in consumption, rightward shift

Question 2

Size of household disposable income

Answer 2

• Personal income + (Transfer payments - Personal Income Taxes)

Question 3

Households’ net wealth

Answer 3

• Value of all assets (money in bank, houses) - any liabilities/debts (mortgage)

Question 4

Income distribution

Answer 4

• More unmet needs for lower income groups, need to spend larger proportion of rise of income
• Redistribution of income (tax rich more, give as transfer payments to poor) raises total consumption of economy

Question 5

Interest rates and availability of credit

Answer 5

• Cost of borrowing money (interest) higher, less spending on big ticket items and vice versa

Question 6

Consumers’ Confidence - Expectations about employment, prices and income

Answer 6

• Low confidence, expect poor econ conditions (low employment & income), rise in precautionary saving
• Confident, expect price rise, consumer spending rise.

Question 7

Invention of new consumer goods and the influence of advertising

Answer 7

• Incorporate latest tech advancements attract customers

- Persuasive advertising and marketing techniques, rising consumption

Question 8

Tastes and attitudes

Answer 8

• ‘Buy now, pay later’, higher consumption

- Anxious of debt, more frugal