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Business AS AQA

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  1. 1-1-the-nature-and-purpose-of-business as
    3 主题
  2. 1-2-forms-of-business as
    5 主题
  3. 1-3-the-external-environment as
    5 主题
  4. 2-1-management-and-leadership as
    3 主题
  5. 2-2-management-decision-making as
    4 主题
  6. 2-3-the-role-and-importance-of-stakeholders as
    3 主题
  7. 3-1-marketing-objectives as
    1 主题
  8. 3-2-understanding-markets-and-customers as
    5 主题
  9. 3-3-making-marketing-decisions as
    2 主题
  10. 3-4-the-marketing-mix as
    7 主题
  11. 4-1-operational-objectives as
    2 主题
  12. 4-2-operational-performance as
    1 主题
  13. 4-3-efficiency-and-productivity as
    3 主题
  14. 4-4-quality as
    1 主题
  15. 4-5-inventory-and-supply-chain-management as
    3 主题
  16. 5-1-financial-objectives as
    2 主题
  17. 5-2-financial-performance as
    6 主题
  18. 5-3-sources-of-finance as
    3 主题
  19. 5-4-cash-flow-and-profit as
    1 主题
  20. 6-1-human-resource-objectives as
    1 主题
  21. 6-2-human-resource-performance as
    1 主题
  22. 6-3-organisational-design as
    3 主题
  23. 6-4-human-resource-planning as
    4 主题
  24. 6-5-motivation as
    1 主题
  25. 6-6-improving-employer-employee-relations as
    2 主题
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Exam code:7131

How consumer income affects costs and demand

  • Disposable income is the money households have left after tax and essential bills (rent, council tax, basic utilities)

    • When disposable income rises, many goods feel cheaper

    • When it falls, buyers tend to reduce their spending, especially on non-essential products

  • The UK has relatively high levels of disposable income in comparison to other developed countries

    • Between 2021 and 2023, UK household disposable income fell by around 2%, as wage rises lagged behind high levels of inflation

    • From mid-2024, pay growth lifted wages for the first time in three years, leading to higher levels of disposable income

Consumer income and costs

  • When average incomes in the economy increase, wage bills and some other costs that firms face can also increase

Reasons for increased costs when incomes rise

Reason

Explanation

Higher wage expectations

  • Workers want pay that keeps pace with the rest of the labour market

    • E.g. Pret A Manger increased shop worker pay twice in 2024 following strong growth in average earnings

Higher National Living Wage

  • The National Living Wage follows median pay, so a stronger economy means greater increases

    • In April 2025, it rose by 9.8%, increasing wage costs for retail and hospitality chains in particular

Higher pension contributions

  • Pension contributions are made by employers as a percentage of pay, so as salaries rise, employer payments rise too

More costly employee benefits

  • Private health schemes, season-ticket loans and staff discounts cost more when their take-up climbs with increases in disposable income

Consumer income and demand

  • When incomes rise, demand usually grows for non-essential products

    • Overseas holidays

      • Since 2024, British citizens have started to plan more foreign trips as pay has increased

    • Premium gym and leisure memberships

      • Higher take-home pay lets consumers upgrade from basic gyms to chains like David Lloyd

    • Big-ticket electronics

      • Families replace TVs or phones sooner when they feel better off

    • Eating out

      • Restaurant bookings climb when wages rise at a higher rate than prices

  • When incomes fall, demand often shifts to budget products

    • Discount groceries

      • Aldi and Lidl gained customers during the 2022–23 cost-of-living crisis, as households traded down

    • Own-label value ranges

      • Sales of the cheapest supermarket lines grew by 46% in 2022

    • Stay-at-home entertainment

      • Streaming and gaming offer cheap nights in comparison to cinema trips

    • Postponed big purchases

      • New car registrations and furniture sales fell by 3.2% in December 2023 when disposable income levels fell

The impact of incomes on demand

Income level strongly influences demand for

Income level has little influence on demand for

  • Overseas package holidays and cruises

  • New cars and private-lease vehicles

  • Designer fashion and luxury cosmetics

  • Private healthcare

  • Premium gym memberships

  • Home improvements and kitchen remodels

  • Staple foods (bread, milk, potatoes)

  • Basic toiletries (toothpaste, soap)

  • Fuel (petrol, gas, electricity)

  • Public transport season tickets to work/college

  • Prescription medicines

  • School uniforms and stationery

  • Tobacco

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