4 Types of Consumers
- Individual
- Businesses
- Government
- Exports
Consumer
Anyone who buys goods or services for personal use
What is required in order to consume?
Income
Sources of Income
- Income From Work
2. Income From Wealth
Two Types of Income From Work
- Wage
2. Salary
Wage
Earnings paid by the hour
Salary
Earnings paid on a weekly or monthly basis
Wealth
The value of things that you own
Where does wealth come from?
- Interest
2. Rent
What can you do with your wealth?
- Savings
2. Spending
Factors That Influence How Much We Save
- Wealth
- Expectations
- Interest Rates
- Taxes
Factors That Determine How You Save
- Safety (your money’s safety)
- Rate of Return
- Liquidity
Number One Problem With Spending
Consumers can not afford everything they would like to own
Therefore they have to make choices
Average Propensity To Consume
The portion of a persons total income that they spent
Average Propensity To Save
The portion of a persons total income that they save
Marginal Propensity To Consume
The portion of the change of income that a person consumes
Marginal Propensity To Save
The portion of the change of income that a person saves
Paradox of Thrift
People saving more money individually equals less total income
Multiplier Concept
All money that one spends becomes income to another
Benefits of Advertising
- Provides Information
- Can result in lower prices
- Stimulates competition
- Stimulates demand
- It pays for the media
Negatives to Advertisement
- Don’t inform
- Misleading
- Increases the cost of goods
- People buy products they don’t need
Advertising Strategies
- Slogans/Jingles
- Rational Appeal (they rely on logic and reason)
- Emotional Appeal
Types of Emotional Appeal
- Shock
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