the role of consumers in the economy - topic two Flashcards
What is consumer sovereignty?
The idea that consumers can influence production decisions based on what G&S they purchase.
What do individuals do with their disposable income?
They make a choice to either spend or save.
Define average propensity to consume.
The ratio of consumption expenditure (C) to disposable income (Y).
Define average propensity to save.
The ratio of savings (S) to disposable income (Y).
What is marginal propensity to consume?
The change in consumption expenditure resulting from a change in disposable income.
What is marginal propensity to save?
The change in savings resulting from a change in disposable income.
How does income affect individual consumer choice?
As income rises, the level of saving increases.
List factors influencing individual consumer choice.
- Income
- Price
- Price of substitutes
- Price of complements
- Preferences/taste
- Advertising
What is income in the context of consumer choice?
The consumption and saving opportunity gained by an entity within a specified timeframe, generally in monetary terms.
How does price influence consumer choices?
The amount of money expected, required, or given in payment for something influences decisions.
What are substitutes in consumer goods?
G&S that can be used as alternatives in consumption, e.g., butter and margarine.
What are complements in consumer goods?
G&S that are used in conjunction with each other in consumption.
How do preferences/tastes affect consumer behavior?
Consumers have different preferences and tastes that can be influenced by various factors.
What role does advertising play in consumer choice?
Spreading information or images about a good or service to consumers through mass media.
What are the sources of income?
- Wages
- Rent
- Interest
- Profits
What is the main source of income for consumers?
Wages from labor.
How does rent serve as a source of income?
Land can generate income when rented, and investment properties can provide property income.
What is interest from capital?
Returns from ownership of capital and wealth that create ongoing income.
What is profit from entrepreneurial skills?
Income considered a return from the use of entrepreneurial skills if businesses make profits.
What is social welfare?
A system that provides assistance to individuals and families in need.
What is the age pension?
Financial assistance for people over 67 who are retired.
What are parenting payments?
Payments for primary carers of young children, means tested according to income level.
What is disability support pension?
Support for those with permanent conditions preventing them from working.
What is jobseeker payment?
Financial support for those aged 22-67 who are seeking work but unable to find it.
