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Price level is a major factor in determining the purchasing power of households. As price levels fall, the purchasing power will increase for those with lower incomes and decrease for those with higher incomes. Low-income households are more likely to spend their money on necessities such as food and clothing than on luxuries such as entertainment or home appliances, while high income households purchase items that may be considered necessities but also have an element of luxury.

As the price level falls, the purchasing power of households’ real wealth will increase. As a result, low-income households are more likely to spend their money on necessities such as food and clothing than on luxuries such as entertainment or home appliances. Meanwhile, high income households purchase items that may be considered necessities but also have an element of luxury.

dollars, currency, money @ Pixabay

Price levels act as a major factor in determining the purchasing power for different types of household incomes. Low-income households are more likely to spend their money on necessities such as food and clothing rather than luxuries like electronics; while higher income households might invest in things they deem necessary yet luxurious at times. Price levels play an important role when it comes to how people choose what purchases .

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