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spending and
Consumption is defined as the ‘using up’
of goods and services in order to satisfy
our wants.

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Durables and Non-Durables Spending
 Provide a flow of
services to the
consumer over a
number of years
 Replaced infrequently
 DVD recorders
 Freezers
 Cars
 Furniture
 Televisions
 Personal computers

tutor2u™ AS Economics
Durables and Non-Durables Spending
Durables Non-Durables
 Provide a flow of  Used up at the point of
services to the consumption
consumer over a  Require immediate
number of years replacement
 Replaced infrequently  Food and drink
 DVD recorders  Newspapers
 Freezers  Visits to the cinema
 Cars  Household fuel
 Furniture  Petrol for the car
 Televisions
 Personal computers

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Types of personal income
 Income sources
 Wages, salaries, rent, dividends, interest rate,
pension funds etc.
1. Gross personal income (GPI)
2. Disposal personal income (DPI)
1. DPI = GPI – income tax
3. Real disposable income

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Income and consumers’ spending
Increase in income tends to increase in
consumption, and better quality products
Along with increase in spending saving
also increases

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Influences on consumer spending
 Wealth
 Borrowing
 Changes in the rate of income tax
 Changes in distribution of income
 Expectations of future incomes and

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Changes in household expenditure
 Due to increase in real income, changes
in taste, fashions, introduction of new
• Food
• Transport and vehicles
• Housing
• Durable household goods
• Services

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Part of disposable income which is not
spent is saved.

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Why people save
 Income
 Social attitude towards saving
 The desire to provide for future needs
 Saving for particular objective
 Saving schemes
 Rate of interest
 Economics conditions

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End of chapter

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