Personal Income and Consumer Context

The main factor determining the magnitude andthe structure of demand in the consumer market, the personal income of the population. The income factor, unlike the price, is considered to be the direct determinant of demand. The character of this dependence was once expressed by JM Keynes, who wrote that the tendency of people to increase their needs, and then, naturally, consumption, is a special psychological law of the nature of man, which, ultimately, attracts it to increase and personal disposable income.

In principle, the hypothesis of absolute income even earlierwas formulated and developed by Engel. According to the well-known law of Eingel, the structure of purchases and expenditures of the population can vary significantly depending on the level of income: the lower the income, the more it is spent for food (meeting the needs of the person) and, conversely, the higher the income level, the greater part it goes to satisfaction of the "secondary" needs of man as a social object. In addition, it is significant that, as a rule, a 1% increase in income among low-income segments of the population, as a rule, causes a more active response of consumers than the same indicator among the wealthy strata.

Theoretically, the problem is how interrelatedpersonal income of incomes and market conditions, is studied mainly in the aspect of the influence of the purchasing power of the population on the value of commodity turnover. However, the interaction of household incomes and the consumer goods market, in our view, should be viewed in a broader perspective, namely: from the position of a systematic approach to the analysis of the unity of supply and demand. The successful and dynamic development of the consumer market in the region and the achievement of a balance in it are directly related to measures of state revenue regulation aimed at stabilizing the standard of living, forming a middle class of consumers, expanding consumer demand, and stimulating the production of goods and services.

Personal income in economic theory is traditionallydetermine how a certain amount of money that a person receives for any period. But in a market economy, this approach to determining what constitutes a personal income, needs a number of significant refinements. The reason for this is that, firstly, in the conditions of a market economy, personal income is channeled primarily to purchase goods and services for personal consumption. And secondly, in a market economy, any personal income must be provided with an appropriate number of these goods and services, because only under this condition a person retains a material interest in labor.

In the regional aspect, the income of the population is the dominant factor determining the success of the formation and subsequent development of the consumer market.

It is theoretically proven that the demand initiatingthe volume of supply on it, is a derived parameter from the indicators of the amount of money income that the population directs to consumer needs and determines the level of their welfare.

When assessing the level of income from the position of its influenceon solvent demand in the market of consumer services and goods, it is important to correctly establish the value of purchasing power, which is determined by adjusting cash incomes taking into account prices and acts as a real income.

However, at the present time it is necessary to objectively judge the real parameter of the effective demand of the population by introducing both indicators of the expenditure structure and the harmony of their ratios.

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