Firstly, real disposable income is the main influence of consumer expenditure. Richer households tend to spend more than poorer ones. This is important because the amount of real disposable income will dramatically effect the AD as if the amount is low then barely any money will be spent. Secondly, wealth is another factor. The richer people are the higher their APC.
With inflation comes rising cost and lower income families’ resulting in higher numbers of welfare recipients. In the United States the income distribution arrangement is extremely unusual from that of a third world nation, whereas, a small number of families may be very affluent while a majority of families are very deprived. Most distressing is the modification in income distribution. In our society, the underprivileged do not profit from the increased prosperity of our country. Low income families and high income families consist of an extensive income difference.
There are advantages and disadvantages related with inequality; economic benefits and social costs. Inequality has the advantage of creating and strengthening individuals incentives to better themselves in the working industry, which not only helps the individuals, but also boosts the economy. Inequality is not the same as poverty. Inequality is the difference of incomes among different people or households, whatever the levels of incomes. Poverty is having a low income.
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.
A better education and health care will improve the labors’ output, as productivity will be higher. Further to this, people will be more able to save more from their increase in income, which allows higher rates of investment and therefore increase in growth. The graph above is a PPF curve, which shows consumer goods against capital goods. Since there is an increase in Aggregate demand, this will potentially lead to an increase in economic growth as seen from the graph above. However, on the other hand an excessively equal
It is the latter however, that end up with the most capital in the long run. The advantage of free trade from a liberal perspective is the ability of the minority controlling the goods to ascertain more wealth than the majority manufacturing the goods. What Smith’s perspective does not take into account is why nations with more low-level workers are less prosperous than nations with more advanced means of production. Nations that have advanced technologically are better off because their means of production allow for more production from less workers, but cost more and are less appealing to those in control. This element relates directly to the disadvantage of a liberal perspective.
Do Do large firms pay higher wages than small firms? Shiying Chen Abstract： Wage is one of the most important considerations as well as the firm size for job seekers to choose their desirable jobs. The companies providing good wages will gain more competitiveness in the labor market and attract more qualified employees with high productivity. However, due to the difference in capital and resources, the payments for the same occupations in large firms and small firms may vary and cause unbalanced labor supplies. To study the relationship between wages and firm-size, this paper combines statistics analysis with labor economic theories to explain why large firms pay higher wages than small firms and discusses the reasons that lead to the wage difference from the labor economics aspect and puts forward several suggestions to narrow the gap.
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. Item 3B also raises the Marxist Argument that our Capitalist society is the underlying reason as to why there is inequality in our society. It could be argued that Capitalism is to blame for the widening gap between the rich and the poor as Capitalism believes that those who work hard within society , should be rewarded for their work whereas those who don't should not be rewarded as they have not worked hard enough to gain a reward. This type of economic system favours the rich, as the 'rich' people within society are seen to be the hardest working people, this is often not the case, but due to capitalistic ideologies it means that those who are poor tend to stay poor and those who are rich, get richer, meaning that the gap between the rich and the poor
These are designed to increase the level of AD and increase in national income. Lower taxation/higher government spending or lower interest rates will encourage more consumption. The diagram shows an increase in real GDP (economic growth) and a falling output gap. We would expect there to be a fall in unemployment. Therefore two objectives have been met.
Profit maximisation occurs when a firm produces at the point where marginal cost equal marginal revenue (MC=MR). This is the point of profit maximisation as any unit produced after this point will have a greater marginal cost than marginal revenue therefore the marginal revenue being gained from the extra unit will decrease total revenue rather than increase it, thus causing profits to decrease. A reason why a firm may want to profit maximise is that it keeps shareholder happy as they receive a greater share of dividends and also if a firm has profits they can reinvest these profits into research and development (dynamic efficiency). There are many different objectives a firm could have other than profit maximisation. The knowledge of a firm finding out where marginal costs equal marginal revenue is very difficult so some firms may not be able to profit maximise as they do not have the correct knowledge required to do so.