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What are the factors?
Level of income
Price of product
Price of substitute and complimentary products
Consumer tastes and preferences
Advertising
How does the level of income influence expenditure choices?
Higher income means more and higher quality goods and services.
How does the price of a product influence expenditure choices?
Necessities are bought regardless of the price because demand will never decrease.
Demand decreases for luxury items if their prices increase.
How does the prices of substitute and complimentary goods influence expenditure choices?
If the price of an item increases, then the demand for its substitute will also increase.
The prices of complimentary products effect the prices and demands of the actual product.
How do consumer tastes and preferences influence expenditure choices?
The change in tastes and preferences over time changes the demand for products.
What are some sources of income?
Wages
Social welfare, which aims to provide a safety net of minimum income to ensure all consumers are able to afford basic necessities.
Transfer payments, collected by the government through tax and transferred to consumers.
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