3 Microeconomic Forces That Effect Consumer Buying Power

Now when operating a business, you are able to do everything right and still fail. There are factors you have no control over that can severely affect your business as a whole. It is absolutely essential for you to be aware of consumers current financial situation. It is really hard to sell things to people who don’t have any money. Make sure to be aware of these 3 microeconomic forces: 

1. Discretionary Income:This income is used for things that are not a necessity to people’s lives. This is the income people are left over with after they have paid for things like taxes, food, shelter and essential clothing. Things people buy with their discretionary income include IPhones, Video games, Vacations, Tickets to an event and Smart watches.

2. Disposable Income:This income is what people use to buy essential things to keep their lives at an operational peak. It’s an after-tax income that is typically used for things like food, clothing, transportation and shelter. When things like taxes rise faster than the rate of income people will have less disposable income to pay bills. If people have less disposal income to pay bills with then they will also have less discretionary income to purchase non-essential products with.

3. Gross Income:This is the total amount of money earned in 1 year by a household or individual. Gross income is the money you made before the government comes to steal a large percentage of it. Which sadly will probably happen no matter where you are.

Overall, these microeconomic factors are very important for you to know about your target market. If consumers lose a large chunk of disposable income because of a tax increase, then it will be difficult to sell them a luxury car. They will simply just not be able to afford it. 

Side Note:These 3 types of income are also great things to know for when you are developing a budget. Being able to calculate how much of each of income you have is essential to making a budget that will work. Poor budgeting is something that plagues society and is becoming more and more common. Being able to identify these three kinds of incomes will hopefully assist with that.