consumption

Question 1

Consumption

Answer 1

spending on consumer goods and services​ over a period of time.

Question 2

Disposable income

Answer 2

he ​money consumers have left to spend​, after taxes have been taken away and any state benefits have been added.

Question 3

marginal propensity to consume (MPC)

Answer 3

how much an increase in income affects consumption

Question 4

savings

rise in consumer confidence…

Answer 4

will decrease savings

Question 5

The marginal propensity to save (MPS)

Answer 5

how much of an increase in income is saved

Question 6

average propensity to save (APS)

Answer 6

the average amount saved out of income.

Question 7

influences on consumer spending

Interest rates

Answer 7

If interest rates are high, the price of the good will effectively be higher since more interest needs to be paid back and this will lead to a reduction in consumption.

High interest rates also increase mortgage repayments so reduce consumption.

Also, a rise in interest rates decreases the value of shares and so people experience a negative wealth effect.

Question 8

influences on consumer spending

Consumer confidence

Answer 8

• If people are confident about the future and expect pay rises, then they will continue or increase their spending.
• If they expect high levels of inflation in the future, they will buy now as it will be at a cheaper price, so consumption will increase.
• If they expect a recession and fear possible unemployment, consumption will decrease as people may save more

Question 9

Wealth

Answer 9

a stock of assets

Question 10

influences on consumer spending

wealth effect

Answer 10

People with greater wealth tend to have greater levels of consumption, known as the wealth effect: a change in consumption following a change in wealth

Question 11

influences on consumer spending

Distribution of income

Answer 11

Those on high incomes tend to save a higher percentage of their income than those on low incomes and so a change in the distribution of money in the economy will affect the level of consumption.

If money is moved from the rich to the poor, consumption is likely to increase as the poor have a higher MPC.

Question 12

influences on consumer spending

Tastes and attitudes

Answer 12

If people were less materialistic, consumption would decrease.