Economic environment - disposable income takes a dive

News of a really important economic development that business students will need to be able to understand.  Consumer disposable income is falling under pressure from rising prices of essential items such as food and energy whilst wage rises are not keeping pace…

For most business teachers, the bening economic environment in recent years has made it relatively straightforward to explain concepts such as GDP growth, inflation and consumer spending.

However, as the UK and global economy moves into a period of severe downturn and uncertainty, the economic environment facing businesses becomes much more important.

This piece in The Times is particularly important.  It describes how households have seen their disposable income fall in more than a decade. On average, they have about £215 per month less to spend after covering essential bills.  A good exercise for business students would to be to consider the implications of this change on demand for various markets. 

What are the implications for demand in markets which are reliant on consumer spending for revenues? 

Which market segments will benefit most if consumers become more price-sensitive?

Are all consumers affected in the same way?

To what extent have your students (or their families) started cutting back spending to account for higher essential bills?

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