different social group have different expenditure levels. what does this indicate?
Answers
Answer:
People spend their money on goods and services. They get their money from working. However they can only spend their income after they pay taxes. The income they can spend is called disposable income.
People with different level of wage tend to have different spending patterns. The poor people will spend less of their money on certain things like cars, shoes but spend most percentage on their houses, food etc.
This is because poor people cant afford to have this luxury. They have no choice but to focus on providing their needs instead of wants. All of the poor people's spending pattern will mostly be food, housing etc.
Rich people however will have a different spending pattern. Rich people will spend less percentage on their needs and start spending on their wants. They are the people who have the freedom to buy luxury items.
Rich people may spend less percentage on their house but that doesn't mean they spend less money. In today's economy, the rich and the poor gap is high yet the percentage difference is only by a bit. This means they will allocate their money to another category.
Rich people generally earn more than poor people and that's why their spending pattern differs. Some other things affect this but real income is still the most important.