3.2.2 Consumer Spend

The economic importance of consumers is that they are essential to the process of wealth creation (and everyone has wants and needs)

Consumers spend money on goods and services.  They might obtain that money from current earnings, derived from their participation in wealth creation as described above (3.2.1), but they might have other sources of finance: savings, or benefit payments from the government.  They have to pay taxes, though.  What is called ‘disposable income’ is “the amount of money that an individual or household has to spend or save after federal, state, and local taxes are paid”.

Some of their disposable income must be spent on “essentials like food and rent”.  The remainder is available for what is referred to as ‘discretionary spending’, which they can spend on leisure and luxury items.

Consumers’ freedom of choice has several advantages:

●  Their purchasing decisions reflect their personal preferences, not what someone else thinks they might want.

●  Their tastes keep pace with modernity – and partly define it.

●  Their purchases can reflect their cultures in a pluralist society.

Economic governance is more acceptable as it increases people’s disposable income, and therefore their opportunity to choose for themselves.

Wealth cannot be created unless someone wants to buy goods and services – and that is the economic importance of consumers.  When people choose to spend their money immediately, rather than save, they boost economic activity.  They are providing opportunities for others to make money.

People’s desire to have money to spend – to be consumers – is a powerful incentive for them to create wealth, whether through employment or by being self-employed.


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This page is intended to form part of Edition 4 of the Patterns of Power series of books.  An archived copy of it is held at https://www.patternsofpower.org/edition04/322a.htm