Individual Household Demand - Assignment Example

Developed a simple household budget

Budget element

Amount(£)

Income

salaries

1500

Family business

400

Gifts and donations from friends

100

Total income

2000

Expenses

food

600

rent

300

Traveling and repair

200

Entertainment

150

Medicare

100

education

180

Holiday tours

150

Bank charges

50

contingencies

100

savings

170

Total

2000

            From the budget, it can be seen that essential commodities constitute a substantial proportion of the expenditure. The amount of money spent on food is very high in this simple budget. This can be attributed to the fact that the level of inflation continues to surge making the expense very high. At the same time, it can be seen that other charges line the bank, and interest charges can be high when accumulated. Most households who fail to include them in the budget risk failing to experience a budget crisis. Moreover, expenditures on entertainment and social things are also very high if accumulated. From the budget, the expenses made on tours, and entertainment are summed as almost equivalent to the amount incurred on the essential goods (Chiuri, 2000).

            Preparing a budget is completely different from following the budget estimates. Most households who prepare budgets fail to completely adhere to their set budgets. This is because most households engage in impulse expenditures (Weston, n.d.). Moreover, the unpredictable changes in prices of the foods and other conditions have made it difficult to follow the budgets. Moreover, following this budget require fiscal discipline, which is normally a major problem for households. Most households are unable to forecast the expected changes in the economic environment or may fail to spread their budgets throughout the budget period. In most cases, households tend to spend more heavily immediately after receiving cash than towards the last quarter of the budget period.

            Career change or further education might have a big impact on the budget. First, a career change could enable an individual to acquire additional knowledge on budget preparation or it could result in a change in the social class. For instance, a household that shifts to study economics may learn about the need to increase savings or invest hence changing the budget expenditure. At the same time, advancement in the level of education may result in a change in social class (Pate & McKee, 2010). Such a change is accompanied by a change in the consumption pattern or a change in the products consumed. An advancement or change in career could translate into a change in the level of income. A change in disposable income will lead to a change in the budget. More resources could mean an increase in the amounts of savings or a reduction in the proportion of income spent on basic items.