Changing Consumer Spending Patterns

Food, housing, and transportation use up the most household income. However, consumers at different income levels have different spending patterns. Some of these differences were noted over a century ago by the German economist Ernst Engel, who studied how people shifted their spending as their income rose. He found that as family income rises, the percentage spent on food declines, the percentage spent on housing remains about constant (except for such utilities as gas, electricity, and public services, which decrease), and both the percentage spent on most other categories and that devoted to savings increase. Engel's laws generally have been supported by later studies.

Changes in major economic variables such as income, cost of living, interest rates, and savings and borrowing patterns have a large impact on the marketplace. Companies watch these variables by using economic forecasting. Businesses do not have to be wiped out by an economic downturn or caught short in a boom. With adequate warning, they can take advantage of changes in the economic environment.

Budgeting Tips For Families

Budgeting Tips For Families

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