Consumer Demographics - Essay Example

Consumer demographics due Question Part Age of household head (x) Income (y) y = 111.21 + 73.54x + 0.89x2 Expenditure (y) y = 110.0 + 69.0x + 0.89x2 25 2283.04 2171.25 30 2895.39 2761 35 3552.24 3395.25 40 4253.59 4074 45 4999.44 4797.25 50 5789.79 5565 55 6624.64 6377.25 60 7503.99 7234 65 8427.84 8135.25 70 9396.19 9081 Part 2 Part 3 The life cycle theory explains how individuals save and spend across their lifetime. Individuals’ expenditure is not only depended on current time income but planned for the entire lifetime. Modigliani noted that individual’s income increases from young age to middle age and declines at old age. During young age individuals borrow, to satisfy their needs. At this age, expenditure might exceed income. As income increases, expenditure increases also, but at a slower rate. During working age, some income is used to repay the debts accrued earlier while a considerable amount is saved for old age. Note that the gap between Income and consumption widens as income rises. At a particular age (maybe due to retirement) income earned reaches its peak and therefore starts declining and hence the hump shape. Consumption on the other hand reduces but still at a lower rate (the gap starts reducing). The saved income is consumed during this stage. In a nutshell, individuals are assumed to understand the life cycle of their income and thus use it to control their lifetime expenditure. Part 4 The diagram in part 2 indicates that both expenditure and income increases at young age, reaches peak at the age of 40 and then starts declining. As matter of fact, 25 is a working age and thus it’s expected that income exceeds expenditure. As income increases, expenditure increases. At 40, many individuals retire, their efficiency reduces and thus income starts declining. Consumption also follows trend households trim their expenditure possibly due to low activity. The increase in the amount of savings (the excess of income over expenditure), after 40 years might have resulted from the fact that individuals do not only save during working age but also invest. Income from previous investments, pensions among other old age benefits attribute to this deviation from the life cycle theory expectations. Question 2 Using the geometric method Projected population  Where P is the current population as per the census r is the estimated population growth rate n is number of years Therefore: Adding n to 30th june 2013 India’s population is expected to hit 1400 million mark by 30thApril 2022. Question 3 The proportions are Quantile Number of households xi Household expenditure yi Proportion Cumulatives xi yi 1 2000 800 0.2 0.1297 0.2 0.1297 2 2000 915 0.2 0.1483 0.4 0.278 3 2000 1109 0.2 0.1798 0.6 0.4578 4 2000 1279 0.2 0.2074 0.8 0.6652 5 2000 2065 0.2 0.3348 1.0 1.0000 Totals 10,000 6168 0.2 0.1297 0.02594 0.2 0.4077 0.08154 0.2 0.7358 0.14716 0.2 1.123 0.2246 0.2 1.6652 0.33304 Total 0.81228 G = 1 – 0.81228 = 0.18772 = 18.772 % Question 4 The Impact of Population Growth on Food Consumption, Economic, Income Per Capita, And Market Growth Introduction Among the many factors influencing economic growth and development, the size of population, population composition, as well as the rate of population growth plays an important role. Population growth refers to rate at which the number of persons in a population decreases or increases over time. Overpopulation, especially in the developing and underdeveloped countries lies among the many retardants of economic growth basically, population has had both positive and negative impacts on food consumption, changes in percapita income, market growth and economic growth at large. Outlined below are some of the major effects of population on the above-mentioned determinants of economic development Food consumption Consumption influences output and economic growth via the multiplier effect. Factually, an increase in population is expected to increase consumption. Food is a necessity and an increase in population would definitely increase food consumption. Note that though quite a considerable percentage of the population might not be working, and therefore not earn any income, human beings require food to survive. Therefore, the dependant group will depend on borrowing and therefore reduce savings significantly. The result is that the economy in question invests highly on food production. It is worth noting that; increase in population does not increase earnings from food production since in most cases, the higher the population, the higher the dependency ratio and hence lower income. Economic growth In the study of economic growth, population composition and growth rate happen to be key factors to put into consideration. In developing countries, the population is high, and grows at a high rate. This implies that there is excess labor. In accordance t the rule of demand and supply, this excess labour makes wages remain relatively lower as compared to developed nations. Therefore, capitalists in the global market consider it cheaper producing in developing countries as opposed to the capital abundant regions, especially when the production process is labor intensive. For that reason, investors transfer their capital to highly populated economies in search for cheap labor. The industrialization of china is a good example of this case. Capital deficiency has been marked the largest lag of economic growth in developing countries. However, high population attracts investors who bring capital as outlined above. Once capital flows to these regions, the native’s income increases, due to increased employment, consumption increases and hence the economy grows. In a contrast opinion, if the population is composed of less skilled labour, which happens to be the case in most countries, the effect on economic growth is negative. Less skilled labour causes a mismatch of technology and thus investors might be forced to either shy away from the populated regions or import skilled labour from their homeland. In both cases, high population results to high unemployment rates as well as high dependency rates. High dependency ratio reduces savings, and hence reduces investments and hence negatively impact on GDP growth of an economy. As matter of fact, high populations can make a country enter the vicious cycle of poverty and hence retard its growth in the long run. Note that, if savings reduce, investments reduce, and hence the economy at large suffers from low capital formation. The low capital formation reduces productivity and hence lowers the aggregate income. Since the population is depended on few earners and large pool of an unemployed army, then the savings get lower and lower making worsening the situation. A high population growth causes poor socio-economic development and therefore the government should intervene to control the population. But the population growth can also exert a positive influence on economic development; this means the human ingenuity would create the technology to overcome any environmental constrictions to development. A surplus population is a creation of capital and a necessary condition for its continuance, since capitalism requires a surplus of readily exploitable labor, which it creates by expropriating land, and by displacing workers with machines. Income per capita growth Population and income per-capita growth can be either negatively or positively correlated. For the income, per capita growth is determined by the growth rates of technical progress and human capital. Population growth alters economic growth indirectly via the channel of the two other variables, which are pouring forces of income per capita growth. Nevertheless, population growth does not necessarily mean it is essential for economic growth. As long as people invest in human capital, there is possible sustained per capita long-term growth even with a constant population growth. Growth income per capita consumption is steered by human capital accumulation but the population can slow down or increase the process of economic development. Individuals do not account for the benefits of their investments in children and human capital. Equilibrium can lead to an excessive or inexccessive level of long-run growth as compared to the optimum. It all depends on which scale effect (quality-quantity) trade off dominates. Market growth Increase in population positively affects demand. Increase in demand leads to market growth. Note that increased demand makes prices to rise, hence provokes more suppliers to enter the market. The simultaneous increase in demand and supply makes the entire market to grow. In many instances, population growth creates an excess demand that welcomes external investors and producers and hence opens the market. On the supply side, increased population implies increased labor supply and given adequate capital, production increases. The increased output forces the market to expand as suppliers seek for extra markets to sell their excess output. Negatively, high population might not necessary imply a rise in demand. Demand constitutes of willingness and ability to acquire products. Therefore, if the population in question has low income, the market might stagnate despite the growth in population. Secondly, as population increases dependency, then demand might also reduce with increase in population and hence the market shrinks. In conclusion, population growth can either have positive or negative effects on the growth and development of the economy markets. And the state of a well balanced population is still difficult to be achieved but if achieved it would produce successful and positive results. Bibliography Haugen, D. and Musser, S. (2012). Population. Detroit: Greenhaven Press. Lee, W. (1977). Population growth, economic development, and social change in Bavaria, 1750-1850. New York: Arno Press. Martins, J., Yusuf, F. and Swanson, D. (2012). Consumer demographics and behaviour. Dordrecht: Springer. Neal, C., Quester, P. and Hawkins, D. (1999). Consumer behaviour. Sydney: McGraw-Hill. Smith, J. and Edmonston, B. (1997). The new Americans. Washington, D.C.: National Academy Press. Read More