Recent orders
Effects of Change in Income on Expenditure
Effects of Change in Income on Expenditure
Name:
Institution:
Date:
Abstract
Background: A randomized study was carried out on individuals who were comfortable talking about their income and their spending habits. The study also involved a random sample of all the citizens in order to ensure that the study was as representative as possible.
Methods: The period of study was from October 2013 to March 2014 and the follow up period for the study was after six months. The study involved the use of questionnaires on the employees who were selected. The questionnaires were also mailed to employees who could not be reached physically. The questions contained in the questionnaires included: Employees’ levels of income, age, sex, marital status, their anticipated action in case of increase in income, and their levels of education. The study involved a specific public corporation that is at the centre of public interest, and for that matter represents the interests and the spending habits of most employees. The study also involved the analysis of the company’s annual financial reports in order to get reliable information concerning the employees’ levels of income and levels of education, which is a great determinant of income levels (Kanji, 2006).
Results: A total of ten employees were recruited into the study, and nine out of the ten employees indicated that if their income was increase, they would also increase their expenditure but at a less proportionate rate. There was no response from one employee and the other one employee indicted that increased income would have no effect on his spending habit. Demographic factors such as sex, age, and marital status had great influence on how individuals spent their income but what was clear was that increased income increases people’s levels of expenditure. The spending habits of high income earners were also compared to those of the low income earners and the results showed that the high income earners had a tendency of going for the expensive commodities, which were not in the taste for the low income earners, for obvious reasons (Kanji, 2006).
Conclusion: Income level has great influence on how people spend and the kind of lifestyle they choose. Individuals generally live according to the level of income that they earn (Laband, & McClintock, 2001). The higher the in come, the higher the amount of money dedicated for consumption expenditure. It is noted that income differs across populations and as much as individuals would increase their expenditure with the increase in the incomes, it would only increase relatively to the income levels. That is, high income earners would comparatively dedicate high portions of income to expenditure as their income increases. As much as the low income earners would increase their expenditure, it can not be equal to that of the high income earners (Laband, & McClintock, 2001).
Introduction
Income varies across the population depending on careers, academic achievements, profession, and nature of the enterprise that one runs. According to Ekelund and Tollison (1997), the variations in the income and economic powers are measured by the differences in the uneven wealth distribution and income inequalities, which is a major economic concern today. The differences in income and economic parity have led to differences in the living standards and expenditure pattern. Given that income is the primary measure of consumption and expenditure power, it is therefore essential to analyze how changes in income power influence the expenditure pattern. It is on this account that this study aims at investigating the relationship between income and expenditure/consumption pattern. This study is important in enhancing our understanding on the economic concept of income-expenditure and the variables that are associated with income and expenditure pattern. This analysis will help the researchers deeply understand the differences in expenditure and consumption given a change in disposal income (Ekelund, & Tollison, 1997).
This analysis will enable us establish the nature of the relationship that exists between these economic measures as well as predict the future pattern of expenditure for economic purposes. The basic tenet of income is that individual consumers normally determine the fraction of their current income that will be devoted to consumption on the basis of absolute level of income. Consumption and expenditure are functions of disposable income and as such, as aggregate real disposable income increases, the marginal propensity to consume declines. According to Ekelund, & Tollison (1997), people’s spending habit depend on what is called “fundamental psychological law”, which simply means that households would spend more on goods and services as real disposable income increases, but would not consume all of this increase in real disposable income. Several studies have been carried out in the past to determine the relationship existing between the levels of income and expenditure habits. The findings show that the environment, income levels, and social affiliations were significant determinant of expenditure habits of individuals.
Subjects and Methods
The primary objective of this study is to analysing the relationship between income and expenditure, to investigate the change in consumer expenditure given a change in their disposal income, and to determine the reasons for the differences in the expenditure pattern among different divides. To achieve these objectives, the study involved the use of a specific number of employees, which was nine, from a public corporation. The study involved the use of employees of all ages, genders, and of any marital status. The study involved employees who were comfortable about talking about income and who were able to co-operate with the researchers. They were given questionnaires and given time to respond after which the questionnaires could be collected back. Those who were not available were mailed and all the responses were compiled for proper analysis.
The study relied on both primary and secondary sources of data. The use of questionnaires was part of collecting primary data. The secondary data was collected from the secondary journals, books, internet, and articles. Economic Quarterly Journal was however the rich source of the data. The data (secondary data) was processed using the measures of central tendency and measure of dispersion. The data was represented using tables and graphs. This is because of the fact that the use of these data presentation methods as simple and provides a good visual impression that makes the comparison more easy (Ekelund, & Tollison, 1997).
Results
A total of ten employees were recruited into the study, and nine out of the ten employees indicated that if their income was increase, they would also increase their expenditure but at a less proportionate rate. There was no response from one employee and the other one employee indicated that increased income would have no effect on his spending habit. Demographic factors such as sex, age, and marital status had great influence on how individuals spent their income but what was clear was that increased income is likely to increase people’s levels of expenditure. The spending habits of high income earners were also compared to those of the low income earners and the results showed that the high income earners had a tendency of going for the expensive commodities, which were not in the taste for the low income earners, for obvious reasons (Laband, & McClintock, 2001).
Figure 1:
Annual Income (‘000’) Annual Expenditure (‘000’)
1,000 700
5,000 3,600
10,000 7,200
20,000 14,000
50,000 34,500
100,000 72,000
200,000 72,000
500,000 70,000
1,000,000 65,300
Figure 2:
Discussion
In figure 1, it is observed that expenditure increases with increase in income. It however reaches a point whereby an increase in income only results into a fall in expenditure level. This fall is attributed to the concept of marginal efficiency of consumption (MEC) (Laband, & McClintock, 2001). In the figure 2, there is upward rise in the graph but it starts to move downwards when it reaches a certain point due to marginal efficiency of consumption. It is noted that there is a positive relationship between consumption and expenditure, thereby implying that expenditure is a positive function of income. The two diagrams clearly show how expenditure reacts to changes in income levels, which was the main objective of the study. However, there are so many factors that can influence people’s decisions on their spending habits in relation to changes in their income. The first and most important factor is the psychological-social environment. This is where individuals try to emulate the spending habits of those around them and will thus strive to spend as those whose incomes are slightly above them in order to attain a feeling of belonging (Ekelund, & Tollison, 1997).
When individuals in their everyday living come into frequent contact with superior goods, the result is a “demonstration effect”, which causes the individual to want to spend more as their income increases since they desire the superior goods for status (Laband, & McClintock, (2001). However, an individual’s habit of the desire to belong to some social class and the “demonstration effect” must be considered in the context of the neighbourhood in which one lives. For example, if an individual lived in a poor neighbourhood, say with an average income level of $500 and received $3,000 a year in income, he would consume less and save more since his income would be relatively high as compared to the average income of his neighbours. But if the individual received the same income ($3, 000) and lived in a rich neighbourhood (with an average income of $ 8,000), he would consume more and save less since his income would be relatively low as compared to the average income of his neighbours. This concept implies that the amount of individual’s income that is devoted to consumption expenditure depends on the level of his income relative to the income of other individuals with whom the individual identifies with rather than on the absolute level of his income (Ekelund, & Tollison, 1997).
The other important factor affecting consumption expenditure is that individuals form their habit and expectation on the basis of their previous peak income (highest income level attained so far). They then base their consumption pattern on this income and never want to give up. In case of a recession in the economy, there is likely to be a fall in the household income but the individual will want to maintain the same living standards as when income was at its peak. This would mean that the individual would reduce the level of savings in order to retain his level of expenditure. According to Mattos (2006), as income falls, expenditure will always fall but less proportionally with the fall in income.
References
Ekelund, R. B., & Tollison, R. D. (1997). Politicized economies: Monarchy, monopoly, and mercantilism. College Station: Texas Univ. Press.
Kanji, G. K. (2006). 100 statistical tests. London: SAGE Publications.
Laband, D. N., & McClintock, G. (2001). The transfer society: Economic expenditures on transfer activity. Washington, D.C: CATO.
Mattos, E. (2006). Three essays on fiscal policy and redistribution.
Social Responsibility
Social Responsibility
Social responsibility is the need and desire to perform an act of services or obligation to society and those around you. Our beliefs and thoughts regarding society are what define our place and social footprint. A social footprint is an act that we believe and perform to further better society. Making a conscious decision regarding society is governed by various things key of them being our own perception of society. If we view society as bad and retrogressive, then it is very likely that we will not have any desire to make any form of social impact or have a valid and strong social footprint. However, if our perception of society is constructive and positive, then there is a very high likelihood that we will desire and strive to make a social impact and develop a stringer social footprint (Henriques 45). My own social footprint is making a change in my support of a green environment and taking various measures to ensure I care for the environment and live an eco-friendly life. This footprint requires drawing resources from environmental conservations and care. This implies that in order to make my social footprint have a basis, then there is need for a foundation in environmental conservation and use of eco-friendly resources.
College education is very essential in the quest to achieve environmental care and conservation. In order to achieve the goal to an eco-friendly society, college education plays an integral part in giving students the knowledge needed to properly care for the environment and various things to avoid. College education appeals to a higher sense of responsibility and understanding in most individuals. Lessons are taught on various conservation mechanisms and how to live an eco-friendly life. College education teaches students to form their own opinions and perspectives towards various social issues and make valid conclusions. Indeed when forming one’s social footprint, college education plays a major role in giving them the background knowledge and information needed to implement this(Henriques 35). The place of college education in helping one to implements their social footprint and assume a more proactive approach towards social responsibility can therefore not be downplayed. It is important that students in college are taught on issues relating to environmental conservation and social responsibility so that they can develop a more concrete social footprint. This will enable them to achieve a state of self-pride once they are able to follow through with their social footprint.
Indeed Boyle and Fred Pierce help inform one’s understanding of individual, global and social responsibility with regards to an individual’s social footprint. Individual repsonsibility is directly inclined towards one’s persinal social footprint. This is determined by how someone relates to others in spociety on an idividual basisis. Boyle speculates that individual repsonsibility has a direct co-relation to one’s social footprint and their desire to have a social impact. The major decision an individual makes in relation to their social footprint afffects their individual social responsibility. Global repsonsibility also affcets one’s socail footprint invarious ways. The deisre to have a global impact can be delivered either through implementing an economic or environmental footprint. An economic footprint is likely to have more global impact and effect on a financial scope(Henriques 23). An environemtntal footprint affects global responsibility in apspects of care and conservation of nthe environemnt on a more global scale. Corporates and companies have a greater social responibility to play on a global scope. Their social footprint is hence larger and wider in reach compared to an individual social footprint. Both Boyle and Fred Pierce agree that some certain factors help inform on the social footprint on an indivdual or global scope. These factors include production, distribution and consumption.
In the book, Confessions of an Eco-Sinner by Fred Pierce (2008), he highlights the impact of social responsibility and footprint in an individuals life, especially with focus on consumer consuption. He argues that the position onf many individuals who have an environmental focused social footprint is hypocritical in nature. Fred highlights the hypocrisy of suburban and urban greens in their pretences of sacing the eatrh while at the same time continuing with business approaches that contradict their stand (Pearce 18). Distribution of goods and services are adding to the social decay of the environemnt and contrbuting to global pollution. Both Boyle and Fred argue that production of goods using social friendly measures is just hearsay and the actual methods of implementing social responsibility are actually being neglected (Pearce 14). From their work, one can now have a better understanding of the situation and soocial footprint that comes from well-meaning but muddle-headed thinking. With focus on consumption, Fred argues that we are not in a position to cover the costs that stem from the subsidizing of our accustomed western lifestyle. We can deduce from the work that indeed socially, consumption of good and services that result from subsidizing our western lifestyle will result in future generations paying the price (Pearce 21). This means that innocent children in generations will pay the price unless measures of managing social responsibility are taken and a more concrete social footprint is adopted.
Personally, I am satisfied that there is a responsibility to reduce ones, social footprint. This measure is a step forward towards helping more and more people assume social responsibility. The importance of taking these measures is to ensure that responsibility falls on all parties involved. This mean that on a more individual level, every person will feel an innate need and desire to have a social impact and take the duty of social responsibility more seriously. Every person will have their own self-drive to become socially responsible and there is a very likelihood that society will progress from this approach (Henriques 21). Furthermore, corporates and companies will also understand the role they have to play in their social responsibility usually delivered through Corporate Social Responsibility (CSR) programs. I hence believe that this is a forward step towards achieving social justice and other key goals that have been the target of similar social programs for years on end.
In conclusion, such an action is more likely to promote social justice and responsibility. Social justice can only be achieved if all the stakeholders assume responsibility and become liable for their actions. Unless this happens, then social justice will remain in a state of equilibrium with either parties not yielding and this is a recipe for failure. This will also lead to lack of progress and society will remain in a state of hibernation. Production, distribution and consumption needs to be regularized and various moderation measures taken to ensure that society remains both responsible and active in its quest to achieve true progress. College education and other factors highlighted in the discourse hence play a major role in helping to achieve this goal.
Works Cited
Henriques, Adrian. Corporate Impact: Measuring and Managing Your Social Footprint. London: Earthscan, 2010. Internet resource.
Pearce, Fred. Confessions of an Eco-Sinner: Tracking Down the Sources of My Stuff. Boston: Beacon Press, 2008. Internet resource.
VISUAL ANALYSIS OF ART
Social Responsibility
Name
Institutional Affiliation
Introduction
Every business has an obligation to the society within which it operates. This obligation is meant for the improvement or benefit of the society, owing to the various activities conducted by the said business and their effects to society. The writer seeks to unearth the definition of this term as well as identification of its impact, while still looking at the recommendations.
Definition
Social responsibility is a societal obligation that is part of the responsibilities of a business, conducted for the good of society. This responsibility helps provide opportunities while trying to reduce the exposure of risks to society. In this regard, social responsibility can be looked at in three ways, that is, societal responsibility, environmental responsibility, and social entrepreneurship. Societal and philanthropic responsibility is tied to the obligation that businesses have in the improvement of the wellbeing and welfare of the society, owing to giving back to the community which provides a market for their products and services (Schaper et al., 2014). Procter & Gamble, for instance, provides education on sanitation and hygiene to the communities that it serves for the greater good (Procter & Gamble, 2020). In the process, the health and wellbeing of the community people is improved.
On top of this, environmental responsibility contributes to social responsibility. Owing to businesses at times being careless with how waste disposal and management is done, they are then required to maintain a clean and healthy environment through its enhancement and protection for the good of society. Small and medium-sized enterprises are mostly to blame, since together, they contribute to a greater portion of environmental impact (Schaper et al., 2014). An example of such responsibility can be seen in Unilever taking to the ‘reduce, reuse and recycle’ initiative against plastic packaging (Unilever, 2020). It is looking to reduce the amount of plastic it produces by half by 2025. Social entrepreneurship is the approach of having social objectives met as opposed to financial profit being the focus. The business solutions developed help meet societal needs. The ME to WE movement uses technology and trade products for profit, while donating half of its profit to a charity (ME to WE, 2020). All these actions are basically for the good of the society.
Impact of Social Responsibility
Social responsibility, despite it being positively impacting to the society, is also negatively impacting to the management of the businesses. An advantage from social responsibility is that a business gets to give back to the community that has sustained its business through enriching society further. This helps balance the scale. At the same time, the business is able to gain from social responsibility given that this practice is strategic in marketing the business as well as showing a good ethical standing, thus helping gain trust with the people in society. A business is also expected to give back to the community since it has ample resources to support both itself and the community (Schaper et al., 2014). Another advantage of social responsibility is that SMEs are able to improve environmental outcome by their small but impactful ways. This means that the societal environment is appealing and improved even from small actions from the small businesses. The last advantage from social responsibility is the ability of social entrepreneurs to provide more innovative ways that are beneficial to society as well as providing better ideas that help improve business to the various business people. In the process, social responsibility becomes heavily impactful to society at large.
On the other hand, social responsibility brings disadvantages with it. First, social entrepreneurs struggle to acquire resources to make their innovative ideas available and adaptable by individuals and businesses, thus reducing their societal impact. At the same time, they lack the skills and knowhow required to access capital, which further inhibits their focus. Another disadvantage of social responsibility, in light of societal and philanthropic responsibility, is inability to maximize profits due to shifting of profits to social responsibility. Such a business is seen to be unwilling or lacking skills to be applied in social responsibility. This, in turn, may end up affecting profits and return-clients to purchase of goods and services if the society views this business as selfish (Schaper et al., 2014). One great disadvantage of social responsibility is the idea that businesses are aware of the need for environment and social responsibility at large, as well as the desire, but end up not performing socially. This increases the negative impacts socially and environmentally, and may end up affecting business while such businesses underestimate their impacts. On this note, social responsibility is both a gain and a loss for businesses.
Recommendations
Social responsibility can be done in a manner that balances the actions of a business, gaining profit while still managing to leave a mark on society. It is a good marketing strategy for businesses. Small businesses can take small steps in the right direction. This can be done through something as simple as using energy-efficient lighting and temperature-control in the office, as well as planting vegetation and flowers around the office to help clean the air. This is impactful environmentally. The business can decide to impact society in its own way and to the best of its ability (Schaper et al., 2014). The other way that social responsibility can work is if businesses engage the government and other accomplished organizations (could be a non-governmental organization) in acquiring financing for their innovative ideas and projects. This will help improve the society at large.
Conclusions
To summarize, social responsibility goes a long way in genuinely improving the lives of the communities within which businesses operate, especially the small and medium-sized enterprises. The lives of people within these communities improve while the businesses are able to place themselves better in the market, through indirect marketing strategies. It is only logical that a business gives back to the society that has been making business development, improvement and progress possible.
References
ME to WE. (2020). YOU.ME.US. ME to WE. https://www.metowe.com/Procter & Gamble. (2020). Community impact. Procter & Gamble, USA. https://us.pg.com/community-impact/Schaper, M., Volery, T., Weber, P., & Lewis, K. (2014). Entrepreneurship and Small Business: 4th Asia-Pacific Edition.
Unilever. (2020). Rethinking plastic packaging – towards a circular economy. Unilever. https://www.unilever.com/sustainable-living/reducing-environmental-impact/waste-and-packaging/rethinking-plastic-packaging/#244-421040