Essays on Macroeconomics Assignment

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1. The consumption schedule helps to understand the amount of goods and services that the consumer is willing to consume from the market at different disposable income levels when keeping the other determinants like wealth, price level, indebtness, taxes and so the same. This will make the demand to change at different level of disposable income and the movement will be along the same demand curve instead of a shift in the demand curve which happens when other factors apart from the disposable income of the person changes. This is shown in the chart belowThus the consumption schedule of a household gets affected due to different factors which have been shown below (Consumption.

2012)Disposable Income: A change in the disposable income has an effect on the consumer purchasing power which thereby affects the consumption schedule. If the consumer has a negative sentiment and looks towards saving more of their income they will be left with little money to be spent on goods and services. This will thereby have an effect on the demand of goods and services as consumers will look towards consuming less of it.

The reverse happens in case consumers look towards reducing their savings and increasing the amount of money to be spent on goods and services. The disposable income which the consumer has and is willing to spend on the goods and services thereby has an effect on the consumption schedule. Interest Rates: Interest rates have an influence on the purchasing power of the consumers as higher interest rates makes the consumer borrow little funds and look towards adjusting their expenditure from the income they have.

This will have an effect on the purchasing power and will make the consumer purchase less of the product and will thereby have an effect on the consumption schedule as it will fall. Decrease in the interest rates makes the consumer borrow more funds and look towards increasing their expenditure on goods and services up and above their income. This will have an effect on the purchasing power and will make the consumer purchase more of the product and will thereby have an effect on the consumption schedule as it will rise (Garg, 2010). Consumer Confidence: The confidence level of consumers has a role in affecting the demand for goods and services.

If the consumers perceive that the demand for goods and services will rise due to the fact that the economy is performing better and he will be able to receive sufficient income it results in a change in consumer confidence. This makes the consumer purchase more commodities and look towards ensuring that consumption schedule improves and more products are purchased at the same disposable income. If the consumers perceive that the demand for goods and services will fall due to the fact that the economy is in a recession which will affect his future income will subsquently have an effect on the demand for goods and services.

This makes the consumer purchase less commodities which will reduce the consumption and affect the consumption schedule as less products will be purchased at the given disposable income. Wealth: Increase in the wealth of an individual makes the person save less of his income and spend more as wealth ensures that his bad times will be looked after.

This has an effect on the consumption schedule as the demand for goods and services increases which is seen in the consumption schedule which shows more goods are purchased due to rise in disposable income. Decrease in the wealth of an individual makes the person save more of his income and spend less as he looks towards protecting his future. This has an effect on the consumption schedule as the demand for goods and services decreases which is seen in the consumption schedule which shows fewer goods are purchased due to fall in disposable incomeTaxes: Taxes have a role in determining the purchasing power of the consumer.

Increase in taxes results in the disposable income in the hands of the consumers to fall which makes the consumer purchase less of the commodity as lesser income doesn’t permit the consumer to purchase the same commodity easily. Decrease in taxes results in the disposable income in the hands of the consumers to rise which makes the consumer purchase more of the commodity as higher income permits the consumer to purchase the same commodity easily

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