Factors Influencoing Household Demand
Q1 Analyse the factors which may influence the household demand at a micro level for consumer goods. 1250 words
If the economy is defined as the institution which facilitates the production, exchange and consumption of goods, then the micro-level economy is that pertaining to individual goods and the factors and behaviours affecting individual products. When these micro level economies come together, they combine to create the (macro) economy. Part of the structure of micro economy is the behaviour of households as one of the economic agents. Alongside firms (producers), their decisions and actions are among the most significant features of the circular flow of income model. Central to the model is the consumption by those households of goods and services, and the supply of labour to firms in order for them to function and produce outputs. Households also receive income from a variety of sources, utilising their income in a number of ways as shown later. Consumer expenditure also takes place to complete the flow such as day to day living expenses, savings (for example in the form of asset purchase or pension contributions) and finally in the form of taxes.
The influences upon household decisions, in particular their expenditure (therefore leading to demand) can be described through a variety of factors:
Income
Wheelock provides an indication of income factors which influence expenditure by demonstrating that even the country of residence can determine how proportions of income for households are directed to various expenditure. His logical summary is that poorer nations will spend a greater proportion of income on basic life requirements such as food (2000 page 63). There is a similar variation in proportion of expenditure within nations, where income is unequally distributed between households. The outcome is similar in that households with higher incomes spend more on both luxury and basic commodities. If the level of national income increases then
If the economy is defined as the institution which facilitates the production, exchange and consumption of goods, then the micro-level economy is that pertaining to individual goods and the factors and behaviours affecting individual products. When these micro level economies come together, they combine to create the (macro) economy. Part of the structure of micro economy is the behaviour of households as one of the economic agents. Alongside firms (producers), their decisions and actions are among the most significant features of the circular flow of income model. Central to the model is the consumption by those households of goods and services, and the supply of labour to firms in order for them to function and produce outputs. Households also receive income from a variety of sources, utilising their income in a number of ways as shown later. Consumer expenditure also takes place to complete the flow such as day to day living expenses, savings (for example in the form of asset purchase or pension contributions) and finally in the form of taxes.
The influences upon household decisions, in particular their expenditure (therefore leading to demand) can be described through a variety of factors:
Income
Wheelock provides an indication of income factors which influence expenditure by demonstrating that even the country of residence can determine how proportions of income for households are directed to various expenditure. His logical summary is that poorer nations will spend a greater proportion of income on basic life requirements such as food (2000 page 63). There is a similar variation in proportion of expenditure within nations, where income is unequally distributed between households. The outcome is similar in that households with higher incomes spend more on both luxury and basic commodities. If the level of national income increases then
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