Income

Question 1

what does income mean?

Answer 1

money received by consumers in exchange for their labour or as a reward for investment

Question 2

how does income affect cost and demand?

how does state of economy also affect demand and costs?

Answer 2

demand:
increase in income = higher demand.
decrease income
- decrease in demand

costs
- increase in income =
increase wage bill
- increase in raw material costs.

state of economy affects demand and costs.

• in recession the business needs to reduce costs e.g wage cuts or redundancies to decrease labour costs. lower income means people have less money to spend on product so demand decreases.

in economic boom, wages rises and more people are employed. this may lead to greater costs due to increase in wages. higher incomes means people have more money to spend increasing demand for product the increase in demand leads to increased production costs.

changes incomes affects demand for some products more than others. i.e. depending on whether they are necessities or luxury product.