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he main factors that affect the consumers expenditure are level of income, price of the good or service, the price of substitute and complement goods, consumer tastes and preferences and advertising. and services

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Introduction

There are several factors that affect the individual's demand for goods and services. The main factors that affect the consumer's expenditure are level of income, price of the good or service, the price of substitute and complement goods, consumer tastes and preferences and advertising. An individual's level of income is one of the main factors that affects the individual's demand for goods and services. As an individual earns a higher income, they tend to buy more items and, items of a higher quality as they have more money to spend. If the price of a can of Coke goes up from $0.50 to $1 and income stays the same, the income that is available to spend on coke, which is $2, is now enough for only two rather than four cans of Coke. ...read more.

Middle

For example, if the price of a cup of coffee rose, consumers could replace their morning caffeine with a cup of tea. This means that tea is a substitute good because a raise in the price of coffee will cause a large decrease in demand as consumers start buying more tea instead of coffee. However, some goods are considered to be complement goods, meaning that they are goods that consumers purchase with other goods. For example, a car needs to be bought with fuel. If the price of cars increase, the consumer demand for cars, as well as petrol, would decline. ...read more.

Conclusion

Advertisers conduct extensive research into the wants, interest and fears of consumers, and use this as a basis for marketing and advertising. Government policies that might be used to encourage individuals to increase their savings are tax policies and a rise in interest rates. The tax system can influence an individual's decision to save by making lower taxes on superannuation savings and increasing the tax rate on goods and services. This will discourage consumers to spend, and encourage them to save. By rising the interest rates, consumers will be more likely to save than spend, because they will accumulate interest on their savings which is positive, and accumulate interest on their spending, which is a negative. ?? ?? ?? ?? Katherine Ly- Economics ...read more.

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