Income Level

Topics: Consumer theory, Household income in the United States, Budget constraint Pages: 2 (781 words) Published: January 13, 2013
Income Level
Income level has an effect on behaviors, including what people buy and how much they will pay. According to Bieker, consumer spending forms two-third of all spending in the economy. A change in consumer income will result in consumers buying more or less of product at all possible prices and also cause a change in demand and a shift of the demand curve. If the income and savings of consumers are high (the high consumer spending level), their purchase is parallel or even more expensive even though the price is unchanged. As a result, the economy will have high levels of production and employment so the economy will be thriving. Conversely, if consumers with low income and savings will purchase low-cost products (the level of consumer spending turns down), the level of production and employment will decline. Spending on consumer-packaged goods is different depending on income level. Higher-income households spend almost $1,200 per year more than lower-income households. While lower-income shoppers purchase more often and have smaller quantities, the higher-income shoppers spend more than $10 per trip. (“The economic divide:,” 2012) American income is categorized into three groups: (Kadam,2009) * Top-income group: 59 percent the highest percentage of American earns about $80,000 or more. * Middle-income group: 32 percent of Americans whose income is between $40,000- $60,000 * Lowest-income group: 9 percent of Americans with an earning income below $30,000

The following table shows US daily spending by income levels from January to June in 2012

In terms of the emerging middle class-newly affluent consumers, Alon & Alberto (2012), added that when those consumers have no disposable income, move up to the newly affluent category, their buying behavior are perhaps more price-sensitive and since they are new consumers, they have not yet formed habits—especially the habit to shop for premium brands.” Customer Income effect

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