Consumption concepts
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1.What might trigger an abrupt decline in consumer spending?
2.Identify and list all factors that impact the level of consumption.
3.Choose one factor of consumption and describe what would be the impact on the whole economy if that factor of consumption had declined.
4.Find an article on decreased consumer spending, list the name of the article and provide the link to it.
5.Quote a statement from your article that clearly supports the answer-statement provided in (3).
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Solution Summary
This solution discusses the causes of an abrupt decline in consumer spending, and the factors that impact the level of consumption.
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Aggregate Demand and Supply
1.What might trigger an abrupt decline in consumer spending?
Decline in consumer spending can be traced to increase in the prices of commodities and services.
If price is high, consumers will be discouraged to buy more.
This results during recession where there is widespread displacement of workers. Layoff results to less or no income for workers. A reduced income results to decline in consumption of goods and services.
2. Identify and list all factors that impact the level of consumption.
Factors that impact the level of consumption:
a. Prices. If prices are high then consumption will be low because consuming will use up a higher percentage of a person's income.
b. Inflation. If inflation is low but is rising, then people will want to buy more earlier, so that they get it for a cheaper price as opposed to having to pay for it when inflation is higher. The same applies but reversed when ...
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