Consumer purchasing power and consumption

Definition

Consumer purchasing power refers to the ability of consumers to buy goods and services based on their income levels. Consumption refers to spending by individuals on final goods and services for personal use.

Analogy

Think of consumer purchasing power as your allowance or income, while consumption is what you choose to spend it on - whether it's buying snacks or saving up for something bigger like a new phone.

Related terms

Disposable Income: The amount of money individuals have available to spend or save after taxes and other deductions.

Marginal Propensity to Consume (MPC): The proportion of an increase in income that is spent on consumption rather than saved.

Consumer Confidence: A measure of how optimistic or pessimistic consumers are about the overall state of the economy and their personal financial situation.