Consumers Flashcards
what is consumer sovereignty?
ability of a consumer to determine what is produced and in what quantities
what is utility?
the satisfaction from consuming a good or service
what is marginal utility?
the satisfaction of consuming an additional unit of a product
does marginal utility increase or fall with increased consumption?
fall
what are the limits on consumer sovereignty?
- advertising/marketing
- monopolies
- planned obsolescence
- deception
Consumers either ____ or ___ their income
spend or save
when income rises, savings ____
increase
factors that affect consumer choice? (3)
Income
Price
age
Preferences and tastes
Fashion
habits/ addictions
Technology
Advertising, promotions and product endorsement
Cultural influences
Religious beliefs and backgrounds
Societal values
Prices of alternative goods
what is consumption?
act of using consumer goods for the purpose of satisfying wants
what are savings?
disposable income which is not consumed
what does Y=C+S mean
disposable (after tax income) = consumption expenditure+ savings
what is C/Y= APC
consumption expenditure/ disposable income = average propensity to consume
what is S/Y = APS
savings/ disposable income = average propensity to save
Influences on consumption decisions (3)
Current incomes
Past savings
Borrowing from financial institutions
Interest rates
Availability of credit
Wealth
Population size
Consumer expectations (if they buy now, they will beat the price)
Reasons to save (3)
Purchase durables at a later time
To provide for a rainy day
To accumulate wealth
To leave money as a bequest
To build for speculative purposes (e.g to buy shares at a short notice)
Influences on decisions about consumption + savings (3)
Cultural groups
Personality factors
Expectations about the future
Specific future spending plans
Tax policies
Availability of credit
When income rises, people tend to save ____ and consume ___
more
When people save more, APS _____, and APC _____
increases, decreases
Lower incomes spend proportionately ___ of their disposable income
more
C=Co+cY
autonomoous consumption+ disposable income* MPC= total consumption
even with low income levels, individuals will have ____ consumption
positive
what is MPC?
marginal prospenity to consume.. proportion of each extra dollar that is consumed
what is MPS?
marginal propensity to save.. proportion of each extra dollar that is saved
each dollar is either saved or spent, so MPC+MPS = __
1
what are the 5 main sources of income?
wages, rent, interest, profit, social welfare
