People spend their money on goods and services. They get their money from working. However they can only spend their income after they pay taxes. The income they can spend is called disposable income. People with different level of wage tend to have different spending patterns. The poor people will spend less of their money on certain things like cars, shoes but spend most percentage on their houses, food etc. This is because poor people cant afford to have this luxury. They have no choice but to focus on providing their needs instead of wants. All of the poor people's spending pattern will mostly be food, housing etc. Rich people however will have a different spending pattern. Rich people will spend less percentage on their needs and start spending on their wants. They are the people who have the freedom to buy luxury items. Rich people may spend less percentage on their house but that doesn't mean they spend less money. In today's economy, the rich and the poor gap is high yet the percentage difference is only by a bit. This means they will allocate their money to another category. Rich people generally earn more than poor people and that's why their spending pattern differs. Some other things affect this but real income is still the most important.
Gross income is the very first income we earn from the job we work and it is still have to be deducted by the taxes for government which after that is then our disposable income. Taxes is very important in a country because it provides many public facilities and subsidies to the vulnerable citizen, therefore everyone should and must pay taxes on time. Disposable income is again the final or “clean” income we can keep and to decide whether to spend all of them, to save or to lend it to someone else. It is then the next discussion about how different incomes can change consumers’ spending pattern.
Different income groups have different spending patterns for a number of reasons such as the lack or abundance of funds. There is a difference of spending patterns between a person who are poor and the person who are rich. As income rises, consumers’ tend to spend more of their money. The rich have higher income so they will invest more such as capital investment and share market. That particular person is therefore having an economic welfare.
The desire to attain luxury is opposing the ability of that person to actually finding it hard to be luxurious. Some people may not accept the fact that they are not wealthy enough to buy a mansion, expensive cars, branded bags, shoes, clothes and other luxurious goods. In addition, they aren’t wise to decide fatal decisions that if their consumption is more than the income itself, there will be a financial problem that person will face, and if this continues long enough, that person won’t be able to supply the necessities they need for a living.
Financial priority as pertaining to social economical status also plays a large role in motivated spending. There are some who would go on to suggest that the IQ’s of those in both the lower and upper position are directly related to their social economical status. Some people have the opinion of that the less intelligent a person is, the lower his/her status.
Most consumers’ today have the propensity to consume, which means the willingness for them to consume goods and services with a rise in income is increasing. As well as technological advancement, people start to be interested in the latest modern gadgets and equipments like Apple products, Blackberry products, Samsung products and many others. With more education, research and health information, the behavior and their social attitude have changed gradually.
The increase and decrease of income level affects most of the consumers’ expenditure patterns as it is very clear that the wealthier a person is, the more they will spend. However, there are still many reasons beside only the level of income. Different countries have different consumers’ spending pattern because of their social attitude and technological advancement which influence them. There are also countries which the poor are far more than the rich, which results in slow development in the economy and lower consumers’ expenditure patterns. In addition, it is very important and essential for the government to take note of the country’s consumer’s spending patterns.
Spending pattern depends on the type of people. There are some people who are wealthy, there are some who are poor. Wealthy people usually receive money from their job, they work as a skilled worker and have specific specialization for the job. Those people earn more gross income than people who are poor. Poor people are unskilled worker and receive very low income. Sometimes we think to ourselves, why do wealthy people want to spend most of their money instead of saving them? That is due to the endless receiving of money. They have a job that everyone wants to have. Since they receive higher income they will have higher tax. Wealthy people don't really worry much about their disposable income since they have lots of money. High possibility is that they will use their money to spend buying their wants such as living in a mansion with a theater inside, advanced technology gadgets, and etc that is utility and good quality. Actually, they spend more percentage of money to their wants than to merit goods. On the other hand, the poor receive less income than rich people therefore their tax will not be as high as the wealthy people. Therefore, they will use they disposable income on more important things such as merit goods. Example of merit goods are clean water and food in order to survive, a safe comfortable shelter, warm and cozy clothes and etc. They want to buy luxuries but doesn't have enough money to buy them that is why less wealthy people save more and spend less. They can’t spend most of their money on their wants, especially parents, because they have to have the enough amount of money to send their children to school in order to receive healthy education to get a good job in the future. That is why most parents depend on their children. More reasons of why wealthy people prefer spending their money than saving it is because they have consumer’s confidence. They are confident in whatever or how many they buy. Also, people keep on buying more technology devices that are more advanced. Companies keep producing more improved gadgets in order for the consumers to think that they should buy the newer version, and make them feel that they ones they have now is not as “advanced” as the newest one. An example is, the first generation of Iphone was 6 years ago. And now, there are many more generations of Iphone such as Iphone 5, Iphone 4, Iphone ios 7 and many more. And over the time, people have also carried on with the generations. If you look closely, there are less percentage of people using the first generation of Iphone, and most people are using either Iphone 3-5. My point is, people risk to reduce their money to buy more advanced technology advice for many reasons and most people who buys the devices are MOSTLY wealthy people. Most of the people who have bought their wants thinks that they are all utility, when actually they are just goods that will satisfy them. Therefore governments have been trying to increase more prices or create inflation in order for wealthy people to control their shopping addict. There are many disadvantages of shopping too much such as being a shopaholic, possibility of losing your money when you can buy more important things and more. In conclusion, all spending patterns are different in every country. There are some countries’s living costs are high that would convince the citizens to spend less in order to be able to pay taxes and so forth. But there are also some countries that are opposite of that. Overall, spending patterns doesn't only depend on countries but people as well.
If people work, they will got an income which means amount of money we earn if we are working called gross income, then the next step that a worker must do after getting the gross incomeis paying taxes to government , actually taxes goes to government, it was the income for government that government spend to make infrastructure, environment, etc, taxes are very important for a country, it is just like a payment that we give to the country as a payment that we live in thatcountry, the income that we got after we pay tax is called disposable income, it is called disposable income because we can use that income dispostly or freely which means that we can spend thatmoney, or we can save that money, r even we also can be a borrower by using that money. Spending itself means to buy goods and services to satisfy our needs and wants spending was actually means a consumption, to fulfill our needs and wants, we buy goods for satisfaction/ uitility, saving means amount of money that we not either borrow it to someone else or spend it to satisfy our needs and wants because saving is usually done to have money in our future, while borrowing itself happen when spending is greater than your income and your rural saving. Spending pattern are usually affected from the income, the first example is wealth, wealth is the richness of a person, the more money they have, the more wealth they have also but money doesn’t come by their own, in getting money we need to fo hard works such as working at a dirty job or in another tyoes of risky job that may get a huge amount of wages and people who are wealth are usually smart at saving their money because from their wages they can save some of tehir money rather that spend it all, but because they are walth, of course they will have more spending that the poor people because for poor people it was very grateful only to eat rice, but for the wealth people they want to eat only a delicious food in a big restaurant, yearly or monthly teh wealth people always go for check up their healthness and it needs a hge amount of money while poor people not often go for medical check up or may be some of them never been to the medical check up, wealth people always want to use the branded goods while the poor people wear any king of goods at least it is suitable and cheap, wealth people have many properties such as houses, apartment, and cars while the poor people of course don;t have such a thing like taht because they don;t have a huge amount of wages, and wealth people annualy often go for holiday, while the poor people never have holiday because they don’t have any money so while it was holiday, they just kept in their house and work like usual. The second factor ia consumer confidence if a coonsumer were confident with their job and future income they will spend more for example there are 3 workers, the first worker know that the compnay he worked in are at crisis and he will esigned from tat company, so in order for him to still have money, he will reduce his spenidng at that moment so that he can still stay alive when he don;t have any job, he will try to spend as little as possible so that he can have many savign some thing that he can do to reduce his spending are eat once or twice a day, reduce the spending on shopping, use a public transportations because it cost lower than private transportation, and save as many electricity as possible so that he will not spend many money in paying his leectricity, while another worker knowthat hewill got a high post and a high wages so he don’t think anything about saving because every month he will still got a salary but oppositely, he will increase his spending because he knows on later time he will got more wages so he no need to sace any wages.
The last factor is interest rate which means when interest rate are hgih peope tends to save their money atthe bank because if they save their money at the bank they can got higehr interest arte than ever before because if he spend while the interest rate ar highm all goods and services are tends to be high also so it is not profit for them except if they wanted to buy for their daily needs example : food, clothes even though the price is high but they still must buy those thing ti fulfill their needs while if the inteerst rate are low, more people usetheir money for spending not saving because while the interest aret are low, if they save at the bank they will also receive a small amout of money but if they spend, while the interest rate are low all goods and services are also at low prices and all people wanted to buy goods and services at a very low price, as low as possible the price can be, so if the price are low, the demand of that goods will be high but the supply of that goods are low because comsumer wanted to buy that goods because of thecheap price but producers don’t want to produce many goods and services at low price because it cn amke them not profit.
Most individuals gain income through earning wages by working and/or making investments into financial assets like stocks,bonds and real estate.In most countries,earned income is taxed by the government before it is received.The revenue generated by income taxes finances government actions and programs as determined by federal and state budgets.The income that can we spend directly is called disposable income.Gross income is the starting point for determining Federal and state income tax of individuals,corporations,estates and trusts,whether resident or non resident.Different income groups,(upper,middle,and lower class) have different spending patterns for a number of reasons such as the lack or abundance of funds,financial mentality, desire vs.ability to attain luxury.Financial priority as pertaining to social economical status also plays a large role in motivated spending.There are some who would go on to suggest that the IQ's of those in both the lower and upper bracket are directly related to their social economical status;IE The less intelligent,the lower the status,etc.Which would,if it where the case,play another large role in specific spending patterns.
The Bureau of labour statistics identifies different categories of consumer spending:necessities and non-necessities.Together,the two categories make up the aggregate,or total of a household's spending.In the strictest sense,necessities are defined as food,apparel and housing.Housing includes spending on both shelter(or the structure itself) and utilities.Non-necessities include consumer spending on household supplies and furnishings,transportation,health care.The two types of consumer spending pattern can be differ by income.
People have different spending income because they earn different amount of incomes, different income group, spending and savings, the choice of inferior or normal goods, and consumer’s confidence. Working people of the country’s population are the ones who are likely to spend more than elderly people, kids, or college students. The working population earns more money because they work harder, work better, and they have the mentality required to do hard jobs. The Income Group: People who have a higher quality of education are more knowledgeable and more intelligent than those who don’t. People also have different income maybe because of different factors (Promotions, Family, Environment, Satisfaction, etc.). People who are higher in the income group are more likely to spend more money than those who are low in the income group. Spending, saving, and Borrowing: People who spend more tend to make a bad habit. People who like to shop will have a habit of buying things that are useless and they will not need it. Savings takes a huge role in determining a person’s spending pattern. People who save more money will be more likely to spend less money on the things they do not need, instead they just buy the things they need for their life. Borrowing money from people or bank will make a person unhappy and will raise the cost of their things (ex. People who are depressed are more likely to get drunk in bars. It will spend their money on drinks and their spending pattern on alcoholic drinks will rise.). Inferior goods vs. Normal goods: People who are richer will spend more high quality luxury goods, than those poor people. People who are rich will choose normal goods because they are better than inferior goods. People who are poor will buy inferior goods, because inferior goods are a cheaper close alternative to normal goods. (ex. Inter-city bus service is also an example of an inferior good. This form of transportation is cheaper than air or rail travel, but is more time-consuming.). Consumer Confidence: The degree of optimism that consumers are expressing for the state of the economy through their saving and spending activity. People will have a higher consumer confidence if they have a higher income. Lower income people will have lower consumer confidence. Other factors that affect consumer confidence are inflation, house prices, depressing economic news, unemployment, government policies, etc. There are still many factors that can affect the spending pattern of people.
Ofcourse people with lower income have different spending pattern with people with higher ones. Lets just say if people with lower income spend 40% of their money on food, 30% on transportation and others for other things. Then how are they going to live without saving? People with higher wages usually spend lower percentage of their income. Because their income is much higher than lower income ones. But the amount of money spent by lower income ones is lower than the higher income ones of course. Especially because there are some taxes they have to pay. Interest rate would also affect people to stop spending and start saving. Maybe they could minimize the amount of money they spend. Because if there's interest rate, they could gain their money by saving. But sometimes, people with high confidence would spend much and not save. As they think that they would get higher income on the future. So its better for us to choose what to do. If we have high confidence then just spend, but if we have low confidence, try to save.
There are three types of income groups: the first one is luxury, the second one is standard or medium, the third one is the poor one. The luxury is the people that get really big wages or have much money (more than 3 billion rupiah or 300 thousand united states dollars). People that get really big money or wages will spend less and invest or save much. If the medium or standard people are people who can fulfil enough their needs and wants (five hundred million rupiah until 3 billion rupiah or fifty thousand united states dollars until three hundred thousand united states dollars). People that have this amount of wages will spend half and save or invest half of their total money. If the poor, people are people that can only fulfil their needs, but some of them even cant fulfil their needs. People like this will spend most of them to fulfil their needs, some of them still can save a little bit. People want to save or invest because they want to get interest from the bank or get income from their investment. People if save more in the bank, they can get more interest, because interest come from your total money that you want to save times by the interest rate. For example: you want to save one million rupiah or one hundred united states dollars, so 1million times by 2% equals toctwenty thousand rupiah or 2 united states dollars. Some of the people want to invest their money more than save, because invest will get more income than save, but the risk is higher, for example: people want to invest in property or on stock. Example of property, house or apartment or land. Example of stock, The stock of garuda indonesia or the stock of mc donald or any stock from any company. People that have low wages or the poor one are not spending their money more than the rich one, but the percentage of their spend of their money is more. For example the rich and the poor are the same they eat for 100 thousand rupiah for a day, but the percentage for the poor is 10%, but for the rich one is only 0.1%. The poor people spend 50% for their food, 20% for their clothes and transportation, 20% for their rentor homes and 10% for saving. If the standard 30%for their food, 12% for their clothes and transportation, 12% for their rent or homes, and 45% for saving. If the luxury 20%for their food, 8%for their clothes and transportation, 8%for their homes and 64% for their saving.
The conclusion is people have their own spending pattern because they have their own amount of wages or money. Rich people will spend less and save or invest more. William loe /8c
Different income groups have different spending patterns for reasons like amount of funds received, financial mentality, etc. Basically though, it’s because they do not earn the same amount of money per period of time.
Spending is necessary for our daily consumption to fulfill our needs and wants for utility, or satisfaction. Affecting our expenditures are of course, our wealth, current income, our confidence on our future income, and the current interest rates.
Consumer’s current income is one of the main factors affecting our expenditures. Income is known as the flow of cash received from work. After earning cash from work, you will have to pay tax. The amount of income left after paying tax, is then called disposable income. Changes in consumer’s disposable income, tend to lead to changes in consumer’s expenditure patterns.
Consumer confidence is a consumer’s degree of optimism that they feel about their overall state of economy. With a high confidence, consumers will be spending more and saving less, changing their spending patterns. On the other hand, people with low confidence on their future income might start saving more, also causing several changes in their spending patterns.
Wealth represents consumer’s amount of material possessions. For majority of people, wealth may be in the form of shares, properties, or even savings in banks. The role of wealth in consumer’s spending pattern is somewhat great. For instance, when people hold a greater amount of wealth, they are more likely to spend more to satisfy their necessities and desirables.
Interest rate is the amount charge by lender to a borrower for the use of assets and is usually expressed in percentage. Interest rate plays a role in shaping consumer’s expenditure patterns. Lower interest rate makes it easier for people to spend and borrow money, as lower interest rate means consumers will be spending less on the interest costs, leaving them with more income to spend with.
There are 3 income classes; the upper class, the middle class, and the poverty level. Everyone’s expenditure patterns are, as a matter of fact, affected by all the factors above. All 3 different income groups obviously have different purchasing power as they have different amount of income, leading to the different spending patterns.
The upper class may earn US$ 150,000 up to US$ 250,000 per year. The middle classes earn around US$ 23,000 up to US$ 100,000 or even more per year. Below the middle classes, comes the poverty level, which earns below US$ 23,000 per year. This, then, can be considered as a proof that the upper income group has the highest consumption level, while the poverty level income group has the lowest consumption level.
Consumption means purchasing goods and services to satisfy our wants and needs. Gross income is the pure salary we get before decreased by taxes, which will be disposable income. We can use this income in three different ways, either to save, borrow, or spend. Generally, people will want to spend their disposable incomes on consuming good that provides the best utility or most satisfaction. However, the spending patterns between people are different, especially with the different income group, the wealthy, middle class, and the poor. Firms have this information useful as it provides them to know goods and services to produce goods that will attract consumers.
When income rises, the more they will spend. The more wealthy they are, the more they will likely to spend on goods and services. Rich people spend far more, especially on luxury items or leisure activities to increase satisfaction. Nevertheless, they spend a lower proportion to the amount of their disposable income. The poor, however, may realise their very limited amount of money and have to be very careful in managing it. They focus mainly on spending money to basic needs such as food, shelter, and clothing. These factors doesn't fulfill wants, but instead the needs of the poor. Usually, more educated people are wiser to control their money. They should know the maximum amount of money they can spend and how much to save. The interest rate also greatly affects consumer spending. If their is less interest going to be given, consumers will want to spend more. When there is more interest, the spending rate will decrease.
Of course, everyone this world would want to attain luxury goods. It doesn't always mean in having a lot of money, but also by the value such as expensive accesories, cars, banking, and more.
Consumer confidence is an indicator that measures level of optimism of what consumers feel for the economic state and of their own financial situation. How esteemed they feel about balance of income affects their economic decisions (spending activity) and it serves as one of the main indicators of shaping the country's If consumers are more confident, they will make more purchases. On the other hand, if it is lower, people tend to increase savings and spend less.
According to the UK National Statistics, the lowest income group spent a bigger percentage of their total average income on housing, fuel and power (23%), food and non-alcoholic beverages (16%), compared to those in the highest income group (8%) on both categorization. Households of highest income spent a larger proportion on transportion (16%) and recreation or culture (14%) than those in the lowest income (7 and 10%). Income differences is also an evidence for internet access, with 41% in the lowest income group having internet at home, compared with 99% of the wealthy.
In general, it means at the highest income group spends a bigger deal of their money on goods that are satisfying themselves greatly. The low income group spend more of their income on life factors. It greatly explains that the more income and consumer confidence you have, the more you will spend more on satisfying goods and services.
Every people may not have the same income as the other person that also effect their spending pattern. Because the more they receive money from what they have work for, the more they will spend.
Now I will discuss some reasons why different income group have different spending pattern. The first cause is that the real income has risen, higher income enables people to spend more to satisfy their wants. The second cause is people work fewer hours and have more holidays that gave them more time to spent in their holiday time. The third reason is the social attitudes have changed. The fourth reason is because couples will marry later in life/ in later age and they want to have fewer children, usually the single people will go out more/travel more to other countries then when they were couples. The fifth reason is because people have become more health conscious, the spending on sport activities, exercise or sporting equipments, gym membership, more people goes to medical check up to test their blood sugar has increases and the demand for healthy foods have increased that makes the spending pattern on healthy food increased. The sixth reason is about the concern for the environment is growing, this has increased the demand for products which release fewer harmful pollutants into the atmosphere when they are produced or consumed, can be recycled, and are not tested on animals, for example the water powered car or the gas powered car and also the plastic bottle. The last reason or the seventh reason is because the technology has advanced rapidly, new higher quality products or advanced products have become available and this things created new consumer demands and needs. The spending on new DVD players, more advanced computers or laptops, new mobile phones or smart phones such as Blackberry, Nokia, and some more examples, large screen television or LCD and also LED televisions, Fast new internet services, game consoles and other advanced consumer products or services has increased and also make the spending patterns change.
The conclusion is that the different income groups will have different spending patterns because different people have different incomes that makes the spending patterns changed. There are some reasons why people have different spending patterns.
People have different spending pattern because they have different level of income from different types of job and the person with the more income usually spend more than the one who have less income. then there is also other reasons such as :
Pride: Rich people tend to spend more so that they have they latest thing or object because rich people would be ashamed with other rich people because they use cheap products they will demand high quality product so that they don't feel ashamed
Financial Capability : People who is richer financially would spend more and the one who is not will spend less Ex. Rich people would go to better hospital because they also can afford the hospital but if the poor people would just go to the cheaper government hospital or worse only to a cheap roadside clinic
Age differences : people who is in their teens would spend more because they wanted the latest thing so that they will follow the trend of their society and spend more on stuff such as gadgets,mobile phones and stuff but if the person in their 60's or 70's would not buy that kind of stuff because they don't need them unlike the teens
Needs and Wants : all of the people in the world have different needs and wants for Ex. people who needs medical support spend more than the people who is healthy because they need to buy medicines and maybe pay the hospital bills and etc and different people have different wants such as rich people want the things that is the most expensive unlike the poor people who have less wants because they know that they wouldn't even afford it
The conclusion is that different people have different income and rich people tend to spend more than the poor people
Different income groups some have different amount of spending. Different job needs different things or amount of things the business needs, which causes them to spend money on that. There are some factors why different income groups spend have different amount of spending.
A major factor is how much fund they have or fund they had supplied for the business. The larger fund, the more money they will spend because a large spending from a large fund won’t be a large percentage. But people with smaller fund will spend a larger percentage of their money to buy goods. An example is a rich man, if he has more money or much money, it is obvious that he will spend more and buy more expensive stuffs. Compare to poor people, they spend less.
A rich man tends to and always spends more than a poor man. And a poor man saves more than the rich man because the poor have small amount of money, which give them the thought to save money for their family in the future. Rich people have lots of money and wont worry if he lacks of money and just spend a lot. A large percentage of a poor man’s money is usually a small percentage for a rich man. So rich people don’t mind a lot on spending. An example is a richer man will buy a better and more expensive cars and tertiary stuffs than a poorer man who will spend more on primary needs.
The spending also depends on the needs of the business such as the expenses, equipment, etc. If a business needs more goods for the business, he will have to buy the needs; therefore it makes him spend more. For example is a car company like Toyota. The group will spend much more on the capital for making to the cars. They will also have to spend money to buy the engines and the materials for the car. Another example is the brand Rolls Royce, they will spend money more on labor. If the person’s role on the business is to buy more, then he will spend more.
Another factor also depends on the attitude of the business owner. If the business owner always wants more and always wants the expensive ones, he will spend much on it no matter what. If he is less intelligent, he will spend more or less because he don’t know when to spend and when to save. There are many people who chose quality over price at spending and always wanted the best for use.
The last factor depends on the condition of the owner or the person. An example is if she’s having a baby, she will spend on the baby needs. Another example is if a person has a larger family, he will need a larger house and will have to spend more for their living.
My conclusion is that, different income groups surely will have different pattern of spending. Especially a richer one will spend more than a poorer one and a poorer person will save more.
There are different types of spending patterns, the low, middle and high class. Low income spenders spend things based on what they need for everyday essentials, middle class would spend more on other things than the lower class income. While the high class people would spend on luxury things.
The majority of people in the world view that the disparity between the rich and the poor is being more apparent. The rich would indulge in multi-million dollar sterilized waterbeds while the poor struggle to find consumable clean water.
However, a new study reveals that the way that both sides of socioeconomic backgrounds prioritize their spending is remarkably similar. While the scale of their spending is different, the statistics is more or less the same. According to the Consumer Expenditure Survey, which looked at the income and spending of citizens, the rich who earn $150, 000 and more per year, compared to the poor with incomes under $1, 500 both spend between 26 % and 29 % of their income on housing. Budgets for clothing and dining are between 3.45 % and 5.2 % respectively.
Those on low incomes use up a large amount of money on basic living essentials. Meals at home, health care and needs took up more of poor people’s allowance, while the prosperous people were able to allocate far more to education and retirement. Middle class individuals spend most of their income on transport and fuel by 21.3%; this category spent by the poor is 20.4% while the rich is 15.5%.
Home buying typically generates a wave of activity as people who purchase homes spend money on improving their homes, installing new appliances, buying furnishings, and other items. Buying and moving into a home is one of the most important financial decisions households make. It is therefore not surprising that NAHB’s analysis shows that a home purchase triggers a series of additional spending on appliances, furnishings, and remodeling activities that exceed typical spending levels of non-moving owners and persist for two years after moving. Specifically, the NAHB analysis shows that during the first two years after closing on the house a typical buyer of a new single-family detached home tends to spend on average $7,400 more than a similar home owner who does not move, including $4,900 in the first year after purchase. Likewise, a buyer of an existing single-family detached home tends to spend about $4,000 more than a similar non-moving home owner, including $3,600 during the first year.
The Data The standard source of data on consumer spending in the United States is the Consumer Expenditure Survey (CES) conducted by the US Bureau of Labor Statistics (BLS). The CES does not only detail consumer expenditures it also allows relating these spending to household characteristics such as income, socio-demographic characteristics, and, what is essential in this analysis, whether these households recently purchased homes. Compared to some other government household surveys, the CES sample is not particularly large - it collects spending data from 6,000 to 8,000 households every quarter – nor is it specifically designed to capture home buyers.
In order to create a meaningful sample of home buyers, this study merges the 13 quarters of CES spending data, from the first quarter of 2004 through the first quarter of 2007. Homes that were built in 2004 or later are defined as new homes. The created sample roughly reflects the national share of home buyers as captured in the American Housing Survey . According to the 2007 1.7 percent of all single family detached home owners bought a new home and 5.4 percent bought an existing house . To analyze spending pooled over several years, all expenditures and income were inflated to 2007 dollars using the Consumer Price Index
Disposable income is the income that a person has left after deducted by direct tax from the governments. The person can dispose their disposable income how they want. They can decide to spend them, save them or lend them to another people. If the income tax rises, the person will have less disposable income. The greater the disposable income of a person, the more money they will spend on goods and services to satisfy them and more money are likely to be save. It does not always depends in disposable income. The prices of the goods and services should also be consider.the amount a person can choose to save or spend their money depends on the real disposable income.
Usually, most people will spend their real disposable income rather than to save them to satisfy their wants. There is a difference in spending pattern between the rich and the poor. This is because different amount of total income they receive. the more income a person has, the richer they are. and the lesser income a person receive, the poorer they are.
Poor people with low real disposable income could only afford to pay basic necessities such as food and shelter. On the other hand, rich people with high disposable income can afford to buy many different kinds of goods and services for pleasure to satisfy their needs. Such as branded clothes, branded cars, branded shoes, etc. to maximised their utility. They are also investing on share markets, capital investments, future investments, etc. Some rich married couples are also investing for their future and their children's future.
Aside from income, there are also three other factors that affect a person's spending pattern. Wealth, consumer confidence and interest rates are important factors that may affect level of consumer expenditure.
Wealth, there is a positive relationship between the wealth of a person and the spending of a person. The wealthier a person is, the greater their spending on goods and services are likely to be. Many people wealth's are on their assets, savings, jewellery, etc.
Consumer confidence, when the consumers are very confident on their future incomes of their jobs, this will encourage them more to spend more money on goods and services. But when the consumers are not very confident on their future income, they would save more rather than to spend their money.
Interest rates, the higher the interest rates of an economy, the more money a person would likely to save their money. But when the interest rates fall, people might have higher propensity to spend their money. When the person spend to much, they might even borrow money because loan repayments are less.
Not only income, but wealth, consumer confidence and interest rate are also the reasons why different income has different spending pattern.
In economics , people have some consuming pattern based on something like trends , incomes , or gender . But now , I would discuss about the consume pattern on income . Some people would spend more on goods because of their income . The more the people gets income , the more the people would save , but not all of them will do it . For example , A has more income than B , so he would have more spending / consuming more then B , and also that A , wouldn't only spend on needs , but also wants . Secondly , is because that income has risen , people that his income has risen will consume more then before with his original income . But other people with the same situation will not spend much , but will save much . Not only we see about his character personality , but we se the economic , reason . Like if you had much income , the tax will increase . Or if you have so much wants , you're tax will be high if you spend too much . But other examples more then tax like someone tends to buy something but he couldn't afford it . So he saves some entire months and then spends on that goods . Secondly is that interest rates . If the interest rates is low , people would spend more because they will get more borrowings , because the interest rates is low . But if the interest rates is high , then the spending will be low , but will save high at the bank . Thirdly is about discounts , if the discounts is high , they will spend much , but if the discounts is low , they will spend less . But they still spend , rather if they didn't get discount
People spend their money on goods and services. They get their money from working. However they can only spend their income after they pay taxes. The income they can spend is called disposable income.
ReplyDeletePeople with different level of wage tend to have different spending patterns. The poor people will spend less of their money on certain things like cars, shoes but spend most percentage on their houses, food etc.
This is because poor people cant afford to have this luxury. They have no choice but to focus on providing their needs instead of wants. All of the poor people's spending pattern will mostly be food, housing etc.
Rich people however will have a different spending pattern. Rich people will spend less percentage on their needs and start spending on their wants. They are the people who have the freedom to buy luxury items.
Rich people may spend less percentage on their house but that doesn't mean they spend less money. In today's economy, the rich and the poor gap is high yet the percentage difference is only by a bit. This means they will allocate their money to another category.
Rich people generally earn more than poor people and that's why their spending pattern differs. Some other things affect this but real income is still the most important.
Nice Answer!
DeleteGross income is the very first income we earn from the job we work and it is still have to be deducted by the taxes for government which after that is then our disposable income. Taxes is very important in a country because it provides many public facilities and subsidies to the vulnerable citizen, therefore everyone should and must pay taxes on time. Disposable income is again the final or “clean” income we can keep and to decide whether to spend all of them, to save or to lend it to someone else. It is then the next discussion about how different incomes can change consumers’ spending pattern.
ReplyDeleteDifferent income groups have different spending patterns for a number of reasons such as the lack or abundance of funds. There is a difference of spending patterns between a person who are poor and the person who are rich. As income rises, consumers’ tend to spend more of their money. The rich have higher income so they will invest more such as capital investment and share market. That particular person is therefore having an economic welfare.
The desire to attain luxury is opposing the ability of that person to actually finding it hard to be luxurious. Some people may not accept the fact that they are not wealthy enough to buy a mansion, expensive cars, branded bags, shoes, clothes and other luxurious goods. In addition, they aren’t wise to decide fatal decisions that if their consumption is more than the income itself, there will be a financial problem that person will face, and if this continues long enough, that person won’t be able to supply the necessities they need for a living.
Financial priority as pertaining to social economical status also plays a large role in motivated spending. There are some who would go on to suggest that the IQ’s of those in both the lower and upper position are directly related to their social economical status. Some people have the opinion of that the less intelligent a person is, the lower his/her status.
Most consumers’ today have the propensity to consume, which means the willingness for them to consume goods and services with a rise in income is increasing. As well as technological advancement, people start to be interested in the latest modern gadgets and equipments like Apple products, Blackberry products, Samsung products and many others. With more education, research and health information, the behavior and their social attitude have changed gradually.
The increase and decrease of income level affects most of the consumers’ expenditure patterns as it is very clear that the wealthier a person is, the more they will spend. However, there are still many reasons beside only the level of income. Different countries have different consumers’ spending pattern because of their social attitude and technological advancement which influence them. There are also countries which the poor are far more than the rich, which results in slow development in the economy and lower consumers’ expenditure patterns. In addition, it is very important and essential for the government to take note of the country’s consumer’s spending patterns.
Spending pattern depends on the type of people. There are some people who are wealthy, there are some who are poor. Wealthy people usually receive money from their job, they work as a skilled worker and have specific specialization for the job. Those people earn more gross income than people who are poor. Poor people are unskilled worker and receive very low income.
ReplyDeleteSometimes we think to ourselves, why do wealthy people want to spend most of their money instead of saving them? That is due to the endless receiving of money. They have a job that everyone wants to have. Since they receive higher income they will have higher tax. Wealthy people don't really worry much about their disposable income since they have lots of money. High possibility is that they will use their money to spend buying their wants such as living in a mansion with a theater inside, advanced technology gadgets, and etc that is utility and good quality. Actually, they spend more percentage of money to their wants than to merit goods.
On the other hand, the poor receive less income than rich people therefore their tax will not be as high as the wealthy people. Therefore, they will use they disposable income on more important things such as merit goods. Example of merit goods are clean water and food in order to survive, a safe comfortable shelter, warm and cozy clothes and etc. They want to buy luxuries but doesn't have enough money to buy them that is why less wealthy people save more and spend less. They can’t spend most of their money on their wants, especially parents, because they have to have the enough amount of money to send their children to school in order to receive healthy education to get a good job in the future. That is why most parents depend on their children.
More reasons of why wealthy people prefer spending their money than saving it is because they have consumer’s confidence. They are confident in whatever or how many they buy. Also, people keep on buying more technology devices that are more advanced. Companies keep producing more improved gadgets in order for the consumers to think that they should buy the newer version, and make them feel that they ones they have now is not as “advanced” as the newest one. An example is, the first generation of Iphone was 6 years ago. And now, there are many more generations of Iphone such as Iphone 5, Iphone 4, Iphone ios 7 and many more. And over the time, people have also carried on with the generations. If you look closely, there are less percentage of people using the first generation of Iphone, and most people are using either Iphone 3-5. My point is, people risk to reduce their money to buy more advanced technology advice for many reasons and most people who buys the devices are MOSTLY wealthy people.
Most of the people who have bought their wants thinks that they are all utility, when actually they are just goods that will satisfy them. Therefore governments have been trying to increase more prices or create inflation in order for wealthy people to control their shopping addict. There are many disadvantages of shopping too much such as being a shopaholic, possibility of losing your money when you can buy more important things and more.
In conclusion, all spending patterns are different in every country. There are some countries’s living costs are high that would convince the citizens to spend less in order to be able to pay taxes and so forth. But there are also some countries that are opposite of that. Overall, spending patterns doesn't only depend on countries but people as well.
If people work, they will got an income which means amount of money we earn if we are working called gross income, then the next step that a worker must do after getting the gross incomeis paying taxes to government , actually taxes goes to government, it was the income for government that government spend to make infrastructure, environment, etc, taxes are very important for a country, it is just like a payment that we give to the country as a payment that we live in thatcountry, the income that we got after we pay tax is called disposable income, it is called disposable income because we can use that income dispostly or freely which means that we can spend thatmoney, or we can save that money, r even we also can be a borrower by using that money.
ReplyDeleteSpending itself means to buy goods and services to satisfy our needs and wants spending was actually means a consumption, to fulfill our needs and wants, we buy goods for satisfaction/ uitility, saving means amount of money that we not either borrow it to someone else or spend it to satisfy our needs and wants because saving is usually done to have money in our future, while borrowing itself happen when spending is greater than your income and your rural saving.
Spending pattern are usually affected from the income, the first example is wealth, wealth is the richness of a person, the more money they have, the more wealth they have also but money doesn’t come by their own, in getting money we need to fo hard works such as working at a dirty job or in another tyoes of risky job that may get a huge amount of wages and people who are wealth are usually smart at saving their money because from their wages they can save some of tehir money rather that spend it all, but because they are walth, of course they will have more spending that the poor people because for poor people it was very grateful only to eat rice, but for the wealth people they want to eat only a delicious food in a big restaurant, yearly or monthly teh wealth people always go for check up their healthness and it needs a hge amount of money while poor people not often go for medical check up or may be some of them never been to the medical check up, wealth people always want to use the branded goods while the poor people wear any king of goods at least it is suitable and cheap, wealth people have many properties such as houses, apartment, and cars while the poor people of course don;t have such a thing like taht because they don;t have a huge amount of wages, and wealth people annualy often go for holiday, while the poor people never have holiday because they don’t have any money so while it was holiday, they just kept in their house and work like usual.
The second factor ia consumer confidence if a coonsumer were confident with their job and future income they will spend more for example there are 3 workers, the first worker know that the compnay he worked in are at crisis and he will esigned from tat company, so in order for him to still have money, he will reduce his spenidng at that moment so that he can still stay alive when he don;t have any job, he will try to spend as little as possible so that he can have many savign some thing that he can do to reduce his spending are eat once or twice a day, reduce the spending on shopping, use a public transportations because it cost lower than private transportation, and save as many electricity as possible so that he will not spend many money in paying his leectricity, while another worker knowthat hewill got a high post and a high wages so he don’t think anything about saving because every month he will still got a salary but oppositely, he will increase his spending because he knows on later time he will got more wages so he no need to sace any wages.
The last factor is interest rate which means when interest rate are hgih peope tends to save their money atthe bank because if they save their money at the bank they can got higehr interest arte than ever before because if he spend while the interest rate ar highm all goods and services are tends to be high also so it is not profit for them except if they wanted to buy for their daily needs example : food, clothes even though the price is high but they still must buy those thing ti fulfill their needs while if the inteerst rate are low, more people usetheir money for spending not saving because while the interest aret are low, if they save at the bank they will also receive a small amout of money but if they spend, while the interest rate are low all goods and services are also at low prices and all people wanted to buy goods and services at a very low price, as low as possible the price can be, so if the price are low, the demand of that goods will be high but the supply of that goods are low because comsumer wanted to buy that goods because of thecheap price but producers don’t want to produce many goods and services at low price because it cn amke them not profit.
ReplyDeleteMost individuals gain income through earning wages by working and/or making investments into financial assets like stocks,bonds and real estate.In most countries,earned income is taxed by the government before it is received.The revenue generated by income taxes finances government actions and programs as determined by federal and state budgets.The income that can we spend directly is called disposable income.Gross income is the starting point for determining Federal and state income tax of individuals,corporations,estates and trusts,whether resident or non resident.Different income groups,(upper,middle,and lower class) have different spending patterns for a number of reasons such as the lack or abundance of funds,financial mentality, desire vs.ability to attain luxury.Financial priority as pertaining to social economical status also plays a large role in motivated spending.There are some who would go on to suggest that the IQ's of those in both the lower and upper bracket are directly related to their social economical status;IE The less intelligent,the lower the status,etc.Which would,if it where the case,play another large role in specific spending patterns.
ReplyDeleteThe Bureau of labour statistics identifies different categories of consumer spending:necessities and non-necessities.Together,the two categories make up the aggregate,or total of a household's spending.In the strictest sense,necessities are defined as food,apparel and housing.Housing includes spending on both shelter(or the structure itself) and utilities.Non-necessities include consumer spending on household supplies and furnishings,transportation,health care.The two types of consumer spending pattern can be differ by income.
ReplyDeletePeople have different spending income because they earn different amount of incomes, different income group, spending and savings, the choice of inferior or normal goods, and consumer’s confidence. Working people of the country’s population are the ones who are likely to spend more than elderly people, kids, or college students. The working population earns more money because they work harder, work better, and they have the mentality required to do hard jobs.
ReplyDeleteThe Income Group: People who have a higher quality of education are more knowledgeable and more intelligent than those who don’t. People also have different income maybe because of different factors (Promotions, Family, Environment, Satisfaction, etc.). People who are higher in the income group are more likely to spend more money than those who are low in the income group.
Spending, saving, and Borrowing: People who spend more tend to make a bad habit. People who like to shop will have a habit of buying things that are useless and they will not need it. Savings takes a huge role in determining a person’s spending pattern. People who save more money will be more likely to spend less money on the things they do not need, instead they just buy the things they need for their life. Borrowing money from people or bank will make a person unhappy and will raise the cost of their things (ex. People who are depressed are more likely to get drunk in bars. It will spend their money on drinks and their spending pattern on alcoholic drinks will rise.).
Inferior goods vs. Normal goods: People who are richer will spend more high quality luxury goods, than those poor people. People who are rich will choose normal goods because they are better than inferior goods. People who are poor will buy inferior goods, because inferior goods are a cheaper close alternative to normal goods. (ex. Inter-city bus service is also an example of an inferior good. This form of transportation is cheaper than air or rail travel, but is more time-consuming.).
Consumer Confidence: The degree of optimism that consumers are expressing for the state of the economy through their saving and spending activity. People will have a higher consumer confidence if they have a higher income. Lower income people will have lower consumer confidence. Other factors that affect consumer confidence are inflation, house prices, depressing economic news, unemployment, government policies, etc.
There are still many factors that can affect the spending pattern of people.
Ofcourse people with lower income have different spending pattern with people with higher ones.
ReplyDeleteLets just say if people with lower income spend 40% of their money on food, 30% on transportation and others for other things. Then how are they going to live without saving?
People with higher wages usually spend lower percentage of their income. Because their income is much higher than lower income ones.
But the amount of money spent by lower income ones is lower than the higher income ones of course. Especially because there are some taxes they have to pay.
Interest rate would also affect people to stop spending and start saving. Maybe they could minimize the amount of money they spend. Because if there's interest rate, they could gain their money by saving.
But sometimes, people with high confidence would spend much and not save. As they think that they would get higher income on the future.
So its better for us to choose what to do. If we have high confidence then just spend, but if we have low confidence, try to save.
There are three types of income groups: the first one is luxury, the second one is standard or medium, the third one is the poor one. The luxury is the people that get really big wages or have much money (more than 3 billion rupiah or 300 thousand united states dollars). People that get really big money or wages will spend less and invest or save much. If the medium or standard people are people who can fulfil enough their needs and wants (five hundred million rupiah until 3 billion rupiah or fifty thousand united states dollars until three hundred thousand united states dollars). People that have this amount of wages will spend half and save or invest half of their total money. If the poor, people are people that can only fulfil their needs, but some of them even cant fulfil their needs. People like this will spend most of them to fulfil their needs, some of them still can save a little bit.
ReplyDeletePeople want to save or invest because they want to get interest from the bank or get income from their investment. People if save more in the bank, they can get more interest, because interest come from your total money that you want to save times by the interest rate. For example: you want to save one million rupiah or one hundred united states dollars, so 1million times by 2% equals toctwenty thousand rupiah or 2 united states dollars.
Some of the people want to invest their money more than save, because invest will get more income than save, but the risk is higher, for example: people want to invest in property or on stock. Example of property, house or apartment or land. Example of stock, The stock of garuda indonesia or the stock of mc donald or any stock from any company.
People that have low wages or the poor one are not spending their money more than the rich one, but the percentage of their spend of their money is more. For example the rich and the poor are the same they eat for 100 thousand rupiah for a day, but the percentage for the poor is 10%, but for the rich one is only 0.1%.
The poor people spend 50% for their food, 20% for their clothes and transportation, 20% for their rentor homes and 10% for saving. If the standard 30%for their food, 12% for their clothes and transportation, 12% for their rent or homes, and 45% for saving. If the luxury 20%for their food, 8%for their clothes and transportation, 8%for their homes and 64% for their saving.
The conclusion is people have their own spending pattern because they have their own amount of wages or money. Rich people will spend less and save or invest more.
William loe /8c
Different income groups have different spending patterns for reasons like amount of funds received, financial mentality, etc. Basically though, it’s because they do not earn the same amount of money per period of time.
ReplyDeleteSpending is necessary for our daily consumption to fulfill our needs and wants for utility, or satisfaction. Affecting our expenditures are of course, our wealth, current income, our confidence on our future income, and the current interest rates.
Consumer’s current income is one of the main factors affecting our expenditures. Income is known as the flow of cash received from work. After earning cash from work, you will have to pay tax. The amount of income left after paying tax, is then called disposable income. Changes in consumer’s disposable income, tend to lead to changes in consumer’s expenditure patterns.
Consumer confidence is a consumer’s degree of optimism that they feel about their overall state of economy. With a high confidence, consumers will be spending more and saving less, changing their spending patterns. On the other hand, people with low confidence on their future income might start saving more, also causing several changes in their spending patterns.
Wealth represents consumer’s amount of material possessions. For majority of people, wealth may be in the form of shares, properties, or even savings in banks. The role of wealth in consumer’s spending pattern is somewhat great. For instance, when people hold a greater amount of wealth, they are more likely to spend more to satisfy their necessities and desirables.
Interest rate is the amount charge by lender to a borrower for the use of assets and is usually expressed in percentage. Interest rate plays a role in shaping consumer’s expenditure patterns. Lower interest rate makes it easier for people to spend and borrow money, as lower interest rate means consumers will be spending less on the interest costs, leaving them with more income to spend with.
There are 3 income classes; the upper class, the middle class, and the poverty level. Everyone’s expenditure patterns are, as a matter of fact, affected by all the factors above. All 3 different income groups obviously have different purchasing power as they have different amount of income, leading to the different spending patterns.
The upper class may earn US$ 150,000 up to US$ 250,000 per year. The middle classes earn around US$ 23,000 up to US$ 100,000 or even more per year. Below the middle classes, comes the poverty level, which earns below US$ 23,000 per year. This, then, can be considered as a proof that the upper income group has the highest consumption level, while the poverty level income group has the lowest consumption level.
Anabelle 8C
Consumption means purchasing goods and services to satisfy our wants and needs. Gross income is the pure salary we get before decreased by taxes, which will be disposable income. We can use this income in three different ways, either to save, borrow, or spend.
ReplyDeleteGenerally, people will want to spend their disposable incomes on consuming good that provides the best utility or most satisfaction. However, the spending patterns between people are different, especially with the different income group, the wealthy, middle class, and the poor. Firms have this information useful as it provides them to know goods and services to produce goods that will attract consumers.
When income rises, the more they will spend. The more wealthy they are, the more they will likely to spend on goods and services. Rich people spend far more, especially on luxury items or leisure activities to increase satisfaction. Nevertheless, they spend a lower proportion to the amount of their disposable income. The poor, however, may realise their very limited amount of money and have to be very careful in managing it.
They focus mainly on spending money to basic needs such as food, shelter, and clothing. These factors doesn't fulfill wants, but instead the needs of the poor.
Usually, more educated people are wiser to control their money. They should know the maximum amount of money they can spend and how much to save.
The interest rate also greatly affects consumer spending. If their is less interest going to be given, consumers will want to spend more. When there is more interest, the spending rate will decrease.
Of course, everyone this world would want to attain luxury goods. It doesn't always mean in having a lot of money, but also by the value such as expensive accesories, cars, banking, and more.
Consumer confidence is an indicator that measures level of optimism of what consumers feel for the economic state and of their own financial situation. How esteemed they feel about balance of income affects their economic decisions (spending activity) and it serves as one of the main indicators of shaping the country's
If consumers are more confident, they will make more purchases. On the other hand, if it is lower, people tend to increase savings and spend less.
According to the UK National Statistics, the lowest income group spent a bigger percentage of their total average income on housing, fuel and power (23%), food and non-alcoholic beverages (16%), compared to those in the highest income group (8%) on both categorization. Households of highest income spent a larger proportion on transportion (16%) and recreation or culture (14%) than those in the lowest income (7 and 10%). Income differences is also an evidence for internet access, with 41% in the lowest income group having internet at home, compared with 99% of the wealthy.
In general, it means at the highest income group spends a bigger deal of their money on goods that are satisfying themselves greatly. The low income group spend more of their income on life factors. It greatly explains that the more income and consumer confidence you have, the more you will spend more on satisfying goods and services.
Every people may not have the same income as the other person that also effect their spending pattern. Because the more they receive money from what they have work for, the more they will spend.
ReplyDeleteNow I will discuss some reasons why different income group have different spending pattern. The first cause is that the real income has risen, higher income enables people to spend more to satisfy their wants. The second cause is people work fewer hours and have more holidays that gave them more time to spent in their holiday time. The third reason is the social attitudes have changed. The fourth reason is because couples will marry later in life/ in later age and they want to have fewer children, usually the single people will go out more/travel more to other countries then when they were couples. The fifth reason is because people have become more health conscious, the spending on sport activities, exercise or sporting equipments, gym membership, more people goes to medical check up to test their blood sugar has increases and the demand for healthy foods have increased that makes the spending pattern on healthy food increased. The sixth reason is about the concern for the environment is growing, this has increased the demand for products which release fewer harmful pollutants into the atmosphere when they are produced or consumed, can be recycled, and are not tested on animals, for example the water powered car or the gas powered car and also the plastic bottle. The last reason or the seventh reason is because the technology has advanced rapidly, new higher quality products or advanced products have become available and this things created new consumer demands and needs. The spending on new DVD players, more advanced computers or laptops, new mobile phones or smart phones such as Blackberry, Nokia, and some more examples, large screen television or LCD and also LED televisions, Fast new internet services, game consoles and other advanced consumer products or services has increased and also make the spending patterns change.
The conclusion is that the different income groups will have different spending patterns because different people have different incomes that makes the spending patterns changed. There are some reasons why people have different spending patterns.
People have different spending pattern because they have different level of income from different types of job and the person with the more income usually spend more than the one who have less income. then there is also other reasons such as :
ReplyDeletePride: Rich people tend to spend more so that they have they latest thing or object because rich people would be ashamed with other rich people because they use cheap products they will demand high quality product so that they don't feel ashamed
Financial Capability : People who is richer financially would spend more and the one who is not will spend less Ex. Rich people would go to better hospital because they also can afford the hospital but if the poor people would just go to the cheaper government hospital or worse only to a cheap roadside clinic
Age differences : people who is in their teens would spend more because they wanted the latest thing so that they will follow the trend of their society and spend more on stuff such as gadgets,mobile phones and stuff but if the person in their 60's or 70's would not buy that kind of stuff because they don't need them unlike the teens
Needs and Wants : all of the people in the world have different needs and wants for Ex. people who needs medical support spend more than the people who is healthy because they need to buy medicines and maybe pay the hospital bills and etc and different people have different wants such as rich people want the things that is the most expensive unlike the poor people who have less wants because they know that they wouldn't even afford it
The conclusion is that different people have different income and rich people tend to spend more than the poor people
Different income groups some have different amount of spending. Different job needs different things or amount of things the business needs, which causes them to spend money on that. There are some factors why different income groups spend have different amount of spending.
ReplyDeleteA major factor is how much fund they have or fund they had supplied for the business. The larger fund, the more money they will spend because a large spending from a large fund won’t be a large percentage. But people with smaller fund will spend a larger percentage of their money to buy goods. An example is a rich man, if he has more money or much money, it is obvious that he will spend more and buy more expensive stuffs. Compare to poor people, they spend less.
A rich man tends to and always spends more than a poor man. And a poor man saves more than the rich man because the poor have small amount of money, which give them the thought to save money for their family in the future. Rich people have lots of money and wont worry if he lacks of money and just spend a lot. A large percentage of a poor man’s money is usually a small percentage for a rich man. So rich people don’t mind a lot on spending. An example is a richer man will buy a better and more expensive cars and tertiary stuffs than a poorer man who will spend more on primary needs.
The spending also depends on the needs of the business such as the expenses, equipment, etc. If a business needs more goods for the business, he will have to buy the needs; therefore it makes him spend more. For example is a car company like Toyota. The group will spend much more on the capital for making to the cars. They will also have to spend money to buy the engines and the materials for the car. Another example is the brand Rolls Royce, they will spend money more on labor. If the person’s role on the business is to buy more, then he will spend more.
Another factor also depends on the attitude of the business owner. If the business owner always wants more and always wants the expensive ones, he will spend much on it no matter what. If he is less intelligent, he will spend more or less because he don’t know when to spend and when to save. There are many people who chose quality over price at spending and always wanted the best for use.
The last factor depends on the condition of the owner or the person. An example is if she’s having a baby, she will spend on the baby needs. Another example is if a person has a larger family, he will need a larger house and will have to spend more for their living.
My conclusion is that, different income groups surely will have different pattern of spending. Especially a richer one will spend more than a poorer one and a poorer person will save more.
Kevin 8C
There are different types of spending patterns, the low, middle and high class. Low income spenders spend things based on what they need for everyday essentials, middle class would spend more on other things than the lower class income. While the high class people would spend on luxury things.
ReplyDeleteThe majority of people in the world view that the disparity between the rich and the poor is being more apparent. The rich would indulge in multi-million dollar sterilized waterbeds while the poor struggle to find consumable clean water.
However, a new study reveals that the way that both sides of socioeconomic backgrounds prioritize their spending is remarkably similar. While the scale of their spending is different, the statistics is more or less the same. According to the Consumer Expenditure Survey, which looked at the income and spending of citizens, the rich who earn $150, 000 and more per year, compared to the poor with incomes under $1, 500 both spend between 26 % and 29 % of their income on housing. Budgets for clothing and dining are between 3.45 % and 5.2 % respectively.
Those on low incomes use up a large amount of money on basic living essentials. Meals at home, health care and needs took up more of poor people’s allowance, while the prosperous people were able to allocate far more to education and retirement. Middle class individuals spend most of their income on transport and fuel by 21.3%; this category spent by the poor is 20.4% while the rich is 15.5%.
Monique 8C
Home buying typically generates a wave of activity as people who purchase homes spend money on improving their homes, installing new appliances, buying furnishings, and other items. Buying and moving into a home is one of the most important financial decisions households make. It is therefore not surprising that NAHB’s analysis shows that a home purchase triggers a series of additional spending on appliances, furnishings, and remodeling activities that exceed typical spending levels of non-moving owners and persist for two years after moving. Specifically, the NAHB analysis shows that during the first two years after closing on the house a typical buyer of a new single-family detached home tends to spend on average $7,400 more than a similar home owner who does not move, including $4,900 in the first year after purchase. Likewise, a buyer of an existing single-family detached home tends to spend about $4,000 more than a similar non-moving home owner, including $3,600 during the first year.
ReplyDeleteThe Data
The standard source of data on consumer spending in the United States is the Consumer Expenditure Survey (CES) conducted by the US Bureau of Labor Statistics (BLS). The CES does not only detail consumer expenditures it also allows relating these spending to household characteristics such as income, socio-demographic characteristics, and, what is essential in this analysis, whether these households recently purchased homes. Compared to some other government household surveys, the CES sample is not particularly large - it collects spending data from 6,000 to 8,000 households every quarter – nor is it specifically designed to capture home buyers.
In order to create a meaningful sample of home buyers, this study merges the 13 quarters of CES spending data, from the first quarter of 2004 through the first quarter of 2007. Homes that were built in 2004 or later are defined as new homes. The created sample roughly reflects the national share of home buyers as captured in the American Housing Survey . According to the 2007 1.7 percent of all single family detached home owners bought a new home and 5.4 percent bought an existing house . To analyze spending pooled over several years, all expenditures and income were inflated to 2007 dollars using the Consumer Price Index
Disposable income is the income that a person has left after deducted by direct tax from the governments. The person can dispose their disposable income how they want. They can decide to spend them, save them or lend them to another people. If the income tax rises, the person will have less disposable income. The greater the disposable income of a person, the more money they will spend on goods and services to satisfy them and more money are likely to be save. It does not always depends in disposable income. The prices of the goods and services should also be consider.the amount a person can choose to save or spend their money depends on the real disposable income.
ReplyDeleteUsually, most people will spend their real disposable income rather than to save them to satisfy their wants. There is a difference in spending pattern between the rich and the poor. This is because different amount of total income they receive. the more income a person has, the richer they are. and the lesser income a person receive, the poorer they are.
Poor people with low real disposable income could only afford to pay basic necessities such as food and shelter. On the other hand, rich people with high disposable income can afford to buy many different kinds of goods and services for pleasure to satisfy their needs. Such as branded clothes, branded cars, branded shoes, etc. to maximised their utility. They are also investing on share markets, capital investments, future investments, etc. Some rich married couples are also investing for their future and their children's future.
Aside from income, there are also three other factors that affect a person's spending pattern. Wealth, consumer confidence and interest rates are important factors that may affect level of consumer expenditure.
Wealth, there is a positive relationship between the wealth of a person and the spending of a person. The wealthier a person is, the greater their spending on goods and services are likely to be. Many people wealth's are on their assets, savings, jewellery, etc.
Consumer confidence, when the consumers are very confident on their future incomes of their jobs, this will encourage them more to spend more money on goods and services. But when the consumers are not very confident on their future income, they would save more rather than to spend their money.
Interest rates, the higher the interest rates of an economy, the more money a person would likely to save their money. But when the interest rates fall, people might have higher propensity to spend their money. When the person spend to much, they might even borrow money because loan repayments are less.
Not only income, but wealth, consumer confidence and interest rate are also the reasons why different income has different spending pattern.
Charlotte 8C
In economics , people have some consuming pattern based on something like trends , incomes , or gender . But now , I would discuss about the consume pattern on income . Some people would spend more on goods because of their income . The more the people gets income , the more the people would save , but not all of them will do it . For example , A has more income than B , so he would have more spending / consuming more then B , and also that A , wouldn't only spend on needs , but also wants . Secondly , is because that income has risen , people that his income has risen will consume more then before with his original income . But other people with the same situation will not spend much , but will save much . Not only we see about his character personality , but we se the economic , reason . Like if you had much income , the tax will increase . Or if you have so much wants , you're tax will be high if you spend too much . But other examples more then tax like someone tends to buy something but he couldn't afford it . So he saves some entire months and then spends on that goods . Secondly is that interest rates . If the interest rates is low , people would spend more because they will get more borrowings , because the interest rates is low . But if the interest rates is high , then the spending will be low , but will save high at the bank . Thirdly is about discounts , if the discounts is high , they will spend much , but if the discounts is low , they will spend less . But they still spend , rather if they didn't get discount
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