chapter 17 - households Flashcards
definition of:
disposable income
amount of income a person has available to spend on goods and services after compulsory deductions such as income tax
definition of:
current expenditure
money spent on goods and services consumed within current year (food, clothing, entertainment)
definition of:
capital expenditure
money spent on fixed firms or individuals such as computers, cars and furnitures
types of income groups
low - spend on necessities, low savings, borrow to fund on expenditures
middle - spend lower proportion on food and necessities, able to save, use credit cards and borrow to fund expenditures
high - spend smaller on necessities and purchase luxury goods, high savings, less need to borrow
definition of:
wealth
measured by the amount of assets they own minus their liabilities
positive and negative wealth effect
positive wealth effect - value of assets like investments increase
negative wealth effect - value of asset decrease, people experience negative equity during recession
definition of:
conspicuous consumption
occurs when people purchase goods and services that they feel increase their status or image
determinants of level of spending
- interest rates
- confidence level
- inflation
- size of households
- age
influences on household savings
- have funds to spend in future
- save in bank to earn interest
- for emergency
factors affecting level of savings
- age
- interest rates
- attitude to savings
- consumer and business confidence
- income levels
definition of:
saving
occurs when a person puts away part of their current income for future spending
definition of:
borrowing
occurs when an individual, firm or gov takes out a loan, paying it back to the financial lender over a period of time, with interest payments
amount of money one spend depends on?
- income
- interest on savings
- rent earned from leasing property
- dividends
- profit
definition of:
consumption
buying of goods and services
