What is the most important factor influencing consumer expenditure? by Tim Cullinan

Factors affecting consumer expenditure

2015-02-10 19:34:32 UTC

Consumer expenditure is the amount of money spent by households in the economy. There are multiple ways by which a Government can increase consumer expenditure; one being a cut in taxes. This will increase consumer expenditure as households now have a higher disposable income, this is the amount of money that households have to spend or save after income taxes.

Cutting taxes impacts the amount households save, thus investment (I) will decrease as a cut in taxes provides an incentive for consumers to spend. Ceteris paribus saving will decrease; leading to a possibility of excess demand as firms can't keep up with demand due to the shortage of loans because banks have less savings.

Interest rates are also a crucial factor regarding influence to consumer expenditure as low interest rates means homeowner consumers no longer have to pay the high interest rates associated with their mortgage (excluding capped mortgage). For consumers without a debt - such as a mortgage - they're liable to spend/ save as they wish, however low interest rates gives them an incentive to spend rather than save, as they believe it is more advantageous for them to spend due to low prices. This ties in with consumer confidence, if an individual believes their job is at risk they are less confident to spend on premium/ high priced goods.

R.I.P Phil

[edit] Phil is well and healthy. Fret Not.

2015-02-11 20:00:13 UTC

Consumer expenditure can be influenced by quite a few factors. Interest rates affect consumer expenditure because they influence the cost of borrowing and mortgage interest payments. Higher interest rates increase cost of spending on mortgages. Therefore higher interest rates will lead to lower consumer expenditure because consumers have lower disposable income.

Tax rates are also a significant factor in influencing consumer expenditure. A decrease in income tax means consumers would have more disposable income which leads to increased consumer expenditure.

Furthermore price expectations can influence consumer expenditure. If the present price level is low then future prices will be expected to increase. Then it makes sense for consumers to buy goods and services now while they are still cheap rather than waiting until they become more expensive. If the price level is high but is expected to fall in the future, demand will be low because consumers will wait until prices have fallen to purchase goods and services so consumer expenditure could decrease until the prices fall.

140547 — 2015-02-11 21:08:17 UTC

In Dedication of Phil x

2015-02-12 10:26:43 UTC

Consumption is the amount of money spent by households in an economy. This spending could include durables for example a freezer, and nondurables, such as petrol. Consumption is also the main determinant affecting Aggregate Demand (AD= C + I + G + (X-M))

main factor affecting Consumer EAxpenditure would be consumer confidence and expectations, if people are fretful about the future, for example, losing their jobs, they may reduce their spending and save more. Vice versa, if people have positive expectations of the future, for example, a promotion in their jobs, they may spend more, increasing their consumer expenditure.

Another factor of consumer expenditure could be expectations
of inflation, consumption may increase as there would be expectations that goods may be dearer in the future so they may spend more buying them in advance. However, inflation may also dampen consumer confidence and reduce disposable income so consumption may decrease.

Another factor affecting consumer expenditure could also be
Interest Rates as changes in the interest rates, change the cost of borrowing. If the interest rates increased, people would borrow less and have the incentive to save more, decreasing consumer expenditure and vice versa.

2015-02-12 10:32:14 UTC

Consumer spending is spending on household goods and services. It is the largest determinant of aggregate demand and is 65% of GDP.

In my opinion the most influential factor is consumer confidence. This is because if a person isn't confident about their own financial situation, they may decide to save instead of spending. Resulting in a decrease in aggregate demand.

Two factors affecting consumer confidence are interest and housing market rates. If mortgage interest rates on housing purchases were to increase, it would mean that the person will have less disposable income. The consumer may want to look at the opportunity cost and may have an incentive to save instead of spending. If interest rates were to increase, the cost of borrowing will increase therefore consumers will not take out loans and buy cars for example because they think they might lose their job. Thus deciding not to spend.

Another factor is taxes. If taxes were to fall it provides the consumers an incentive to spend as they have more disposable income therefore more expenditure. However if taxes were to rise then the opposite will occur. People will start saving therefore there will be a decrease in consumer spending.

2015-02-12 13:55:38 UTC

Consumer spending is the amount spent by households on goods and services. It is one of the main determinants of aggregate demand. Durable items include freezers, and non durable items include food and drink.

One of the main factors influencing consumer expenditure is interest rates. Higher interest rates increase the cost of spending particularly on mortgages, hence it will decrease consumer expenditure because people will have less disposable income and therefore they are less likely to spend, decreasing consumer expenditure. Whereas lower interest rates would decrease the cost of spending and therefore increase consumer expenditure as consumers will have more disposable income. Which means that consumers are more likely to take out loans to buy expensive products.

On the other hand, another factor influencing consumer expenditure is taxes. If the government were to decrease taxes, consumers would respond to this by increasing their spending as they would have more disposable income to spend. Disposable income is the money people receive after tax and benefits have been deducted.

2015-02-12 16:50:20 UTC

te demand.

Another factor that influences consumer expenditure is interest rates. If interest rates are low, then the cost of taking out a loan decreases, along with the reward for saving. This means that consumers are going to spend more money on goods and services because they have no incentive to save. This works the other way as well. If interest rates increase, then people will have higher rewards for saving and will have to pay more back on loans. This means that they will either save or spend less.

2015-02-12 17:20:01 UTC

Consumer expenditure is the spending done by households on goods & services.

There are several determinants of consumption, such as:

• Interest rates- the higher the rate of interest, the greater the reward. At any particular level of income, the amount saved increases as the real rate of interest rises & the amount spent on consumption falls.

• Wealth

(I) Physical Wealth: This is the durable goods like cars & furniture. An increase in physical wealth generally reduces consumption. If consumers have recently purchased a number of durable goods, then they have less need to buy more, and so consumption decreases.

(II) Financial Wealth: This is the money, stocks, bank accounts, and other documents that provide a claim to goods. When consumers have more financial wealth they
tend to spend more freely, increasing consumption.

• The level of income

The major determinant of consumption is the willingness and ability to use the real income to buy goods and services. Thus consumption and income are directly related.

The understanding of a family’s income is what allows them to be confident that they will be able to make the necessary payments or to afford to take out the savings, e.g. to buy a car. If they do not feel confident about their level of current and future income, they may want to use their current car for a year more.

2015-02-12 19:14:11 UTC

Consumption is financed primarily out of our income. Therefore real wages will be an important determinant. There is usually a strong correlation between economic growth / and consumer spending. Other factors include:

Interest Rates – Interest Rates influence cost of borrowing and mortgage interest payments. – Higher interest rates increase cost of spending on mortgages. Therefore higher rates will lead to lower spending as consumers have lower disposable income.

House prices – Housing is the biggest form of wealth. When house prices are rising people are more confident to spend they can also re mortgage their houses.
Consumer Confidence. Higher confidence will encourage people to spend more.
Difficulty / ease of borrowing money. e.g. after the credit crunch it was more difficult to borrow from banks leading to lower consumer spending.
Tax rates – A cut in income tax would give consumers more disposable income

2015-02-12 19:51:21 UTC

Consum_ption is spending by households on goods and services.

It could be argued that disposable income (income after direct taxes and welfare benefits have been taken into account) is the most important factor influencing consumer expenditure. There is a strong correlation between demand and income. How much consumed or saved differs from person to person. In general, people on lower incomes are more likely to spend their income. However, people with higher incomes are more likely to save instead. Factors that could effect disposable income;

Interest rates: lower interest rates cuts the cost of paying the debt on a mortgage and therefore increases the effective disposable income of homeowners.

Household wealth: e.g, a sustained fall in house prices might cause a decline in personal wealth and spending as homeowners have less housing equity (difference between the market value of your property and how much still has to be paid on a housing loan.

2015-02-12 21:47:14 UTC

Government expenditure is money spent on public goods and government provisions. Although being a factor of AD like consumer expenditure, changes in government expenditure can also effect the consumption.

If the government decides to increase it's government expenditure, this may include spending more money on employment benefits. Consequently, the people receiving the benefits will see a rise in their disposable income ( income available after tax) and will therefore spend more - increasing consumption. On the other hand, in order to compensate for the large increase in expenditure, the government may decide to increase tax levels. This has a negative effect on the level of consumer expenditure as the amount of disposable income available will decrease so people will spend less. Moreover, a cut in government expenditure may lead to the loss of many jobs in the public sector. This time of job risk and uncertainty will encourage people to save more and spend less (reducing consumption) in preparation for possible unemployment.

The change in the level of consumption and consequently AD will depend upon the levels of cuts on expenditure as well as the time period it is implemented in.

2015-02-12 22:38:26 UTC

2015-02-12 22:51:51 UTC

2015-02-12 23:07:22 UTC

DConsumer expenditure is spending on household goods and
services. Changes in real Income are one of the main factors influencing consuDisposablemer expenditure. income is income after direct taxes and
Uspend on durable goods especially those that require a loan as the taking a loan would be more expensive due to higher interest rates. Also if interest rates are higher consumer have an incentive to save this can also be affected by future expectations if consumers are unsure about their job and expect reductions in wages they may save their money. For example if unemployment is expected to rise or is rising
then consumers are likely to lose confidence therefore consume less as a result less consumer expenditure. Consumer confidence is very important, for example
not only will save more for later, if they fear taxes will increase they are less likely to take a loan out to spend on durable goods such as a car as they would be uncertain on whether they would be able to repay this loan.

2015-02-13 13:47:08 UTC

Greetings, all!
I have evaluated a range of factors which affect consumer spending and after having done so, would like to focus on confidence. Like Adam, I feel as though it is the most significant factor, as all other factors ultimately affect confidence which in turn decreases consumption. As consumption itself is often regarded as the largest single contributing factor to aggregate demand, and the fact that confidence is the largest (in my opinion) factor of consumption - a change in confidence can have a huge impact on aggregate demand as a whole.

All of the other factors of consumption ultimately lead to a change of confidence. EG:
Disposable income - An increase of this will allow the consumer to feel a sense of financial security aqnd thus make purchases and payments with more confidence, oncreasing consumption
House prices - Higher house prices for a consumer with a house may give them more confidence has they feel they have security in the form of it and thus consume more than if their house was worth less.

2015-02-13 13:58:59 UTC

I think the most important factor is expectations. If the consumers expect the future to get better eg. Get a promotion, it's likely to increase their consumption. This is known as positive expectations. However they may fear unemployment, and therefore probably increase their savings. This is known as negative expectations.

2017-09-11 15:08:47 UTC

accommodation

2017-10-02 20:59:04 UTC

https://youtu.be/1eFXuf-eNyo

2017-10-08 12:36:07 UTC

year of publish

N

2017-11-11 09:47:50 UTC

2017-11-29 08:16:45 UTC

2018-01-28 17:04:51 UTC

1m 20m 📎 Tim Cullinan Tim 20m

Factors influencing consumer expectation in point form

2018-04-25 12:32:22 UTC

J

2018-10-07 18:05:40 UTC

2019-06-28 10:23:11 UTC

spend, hence reducing consumer expenditure.

2020-07-24 14:43:08 UTC