Changing levels of consumer income

• What is the impact of the economic climate on businesses?

  It affects prices, investment, and employment
• How does consumer spending influence businesses?

  It affects prices, investment decisions, and employment
• What is income?

  Money received from work or investment
• How does an increase in consumer income affect demand?

  It increases demand for goods and services
• What might consumers buy with increased income?

  Upgraded products or expensive holidays
• What do businesses expect when consumer incomes rise?

  They expect to sell more luxury goods
• How do reductions in consumer income affect spending?

  People buy fewer goods and services
• What alternatives might consumers choose when incomes fall?

  Cheaper alternatives or second-hand items
• What do businesses plan to do when consumer incomes decrease?

  Reduce production and possibly lay off staff
• How do all businesses respond to changes in consumer income?

  Not all businesses are affected equally
• What type of businesses may see increased sales when incomes fall?

  Pound shops selling discounted products
• What are the effects of changing consumer income on luxury and basic items?

  • Increase in consumer income:
  • Luxury items: Increase in demand
  • Basic items: Decrease in demand
  • Decrease in consumer income:
  • Luxury items: Decrease in demand
  • Basic items: Increase in demand
• What is the relationship between consumer income and demand for luxury items?

  Higher income leads to higher demand
• What happens to demand for basic items when consumer income decreases?

  Demand for basic items increases
• What is the expected consumer behavior when incomes rise?

  Consumers tend to spend more on luxury goods
• What is the expected consumer behavior when incomes fall?

  Consumers tend to buy cheaper alternatives