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Study Notes

Real incomes

AS, A Level
AQA, Edexcel, OCR, Eduqas, WJEC

Real incomes measure the amount of disposable income available to consumers (e.g. households & individuals). 

A range of factors impact on real incomes, including:

  • Price Inflation
  • Wage Growth
  • Employment Levels
  • Interest Rates
  • Govt. Tax Policy

There are significant differences in household disposable incomes by region in the UK. For example, in 2013 London had the highest income per head, where the average person had £22,516 available to save or spend. Northern Ireland had the lowest, with the average person having £14,347.

Real incomes are closely linked to market demand (market conditions), since they are an important factor that affects demand. These factors include:

  • Real Disposable Income (how much households have available to spend)
  • Employment and Job Security (when the jobs market is improving, consumer confidence and incomes will improve)
  • Household Wealth (e.g. house prices & share prices) – a rise in wealth can increase consumer demand)
  • Expectations and Sentiment (economic uncertainty causes spending to fall, weakening demand)
  • Market Interest Rates (interest rates affect both the incentive to save and the cost of borrowing) 

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