This is an effect of a lower opportunity cost as the overall cost associated with borrowing has decreased and the marginal benefit of saving has increased, meaning consumers will receive more of a benefit if they purchase goods on credit based agreements opposed to saving, leading to an increase in the amount of credit transactions. This leads to consumer expenditure increasing significantly, meaning more goods are being consumed. Therefore, as consumer expenditure is a component of the aggregate demand formulae an increase in consumption would thereby lead to an increase in aggregate demand. However that said, an increase in consumption largely depends on the consumers’ marginal propensity to consume (MPC) and the overall confidence of consumers. Therefore, if MPC and consumer confidence is at a low, consumers will spend less and save more therefore resulting in a decrease in total consumption levels.
The richer people are the higher their APC. This is because if they have savings and investments, they don’t have to be as careful of unplanned costs. Next, if the consumer’s confidence is high, such as being optimistic about the future then the consumer is less likely to save for a rainy day and is likely to spend and consume more. Also, if interest rates are low then the consumer is less likely to save and thus spend more. Finally, age structure of the population drives consumption.
They will also be more likely to buy the premium diapers that they do not usually purchase due to the higher price. If the price of diapers increases, total revenue will decline. Since there is a large volume of brand substitutability in this industry, if one brand increases their price, consumers can easily switch to another. * Market Structure * The disposable diaper industry would be classified under monopolistic competition. This is due to the relatively large amount of sellers, differentiated products, and easy entry and exit from the industry.
After looking at the pro’s and cons, we should then be able to decide if its more beneficial or not to move manufacturing operations off shore to a country trading partner with weaker currency. In the first part, we shall see the pro’s of moving operations off shore to another country. Undoubtedly, a major reason for a company to move its operations off shore is due to cheap labour. For example, labour in countries in China and India and other certain countries are cheaper compared to highly developed countries such as United States and Japan. This is as the economy is larger in developed countries, their currency appreciates and is much higher compared to less developed countries, thus labor is cheaper to be paid in less developed countries.
One reason for the widening gap between the rich and the poor is that since 1970, the government taxation policies have changed, these policies are more favorable to the wealthy people. This means that households within the higher tax bracket are paying less tax, this in turn then makes the rich people richer meaning the gap between the poor even greater. for example as item 3B shows in 1970 the share of total income taken by the top 1% of earners was only 7.1%this had risen by more than half in 2005 and the share of total income take by the top one percent of income was now 14.3%. A second reason for the widening gap between the rich and the poor in the UK is changes to the labour market, these changes have led to more relatively low paid jobs such as in the tertiary sector. With less people working in the higher paying primary and secondary sectors the gap between the rich and the poor will be widening as more people will begin to work within the substantially lower paying tertiary sector, this will widen the gap between the rich and the poor as it means there will be more people working in lower paid jobs.
Further increase in product line both in terms of high price and product variety, to attract a large range of customers, can affect their lean operating model increasing inventory costs. Increasing customization options could also affect its competitive pricing increasing operation costs. Even though outsourcing operations and services can help keep a better control but in times of high demand they can be compromised since they are not directly a part of the company. The quality of the service is dependent on the ability of the outsourcing company and not Blue Nile. Further, it set lower gross profit margins on high value sales (just to make the sale)
If there is spare capacity (negative output gap), then demand side policies can play a role in increasing economic growth. For example if we decrease interest rates, we will increase the demand in the economy as people have more money as their mortgage costs are decreased. It is the same idea with lowering taxes - this will boost demand, as people have more money to spend as less is taken away from them by the government. Aggregate demand is made up of consumption (consumer spending, Investments Government spending and Exports (minus) imports (Net exports). If anything affects these factors will result in affecting the demand.
If unemployment falls, less people will be claiming unemployment benefits and other similar pay-outs from the government, this will allow a lot of tax to be spent on other things, such as expanding public services further, which also leads to an increase in living standards. Another benefit of economic growth is the increase in confidence, with all these new goods and services on offer to the country, the consumer
GDP is the sum of all goods and services produced in a country during a year (Ferrell). It serves as a baseline that allows nations to compare their relative growth. When GDP is increasing there is correlation to the welfare of the citizens increasing. This is because the more money is circulated through a nation; the more money the government receives through taxes and can invest back into the nation and its citizens. A government can tax more but the effect of taking a higher percentage of one’s money will ultimately lower the amount they spend and put back into society.
National brand marketing requires greater advertising expenditure on the part of the manufacturer to compete with lower-priced private label brands. If consumer preference for the national brand is strong, then pricing can be high enough to support the additional advertising and provide the desired profit margin. National brands are often perceived to be of higher quality and can therefore demand a premium price. Many national brands are now experiencing a loss of market share to private label brands as a result of the narrowing quality gap. There are some advantages of national brands.