Kaitlin Smith 20 September 2016 Overview Rising Incomes Juice Consumer Spending Wall Street Journal 13 September 2016 For the middle class income increased 52 between 2014 and 2015 WSJ expects that most of the people earning more income will spend more money ID: 634887
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Slide1
Ripped From the Headlines
Kaitlin Smith
20 September 2016Slide2
Overview
“Rising Incomes Juice Consumer Spending”
Wall Street Journal, 13 September 2016
For the middle class, income increased 5.2% between 2014 and 2015
WSJ expects that most of the people earning more income will spend more moneySlide3
Income Elasticity of Demand
E
D
I
= “Middle-class oriented retailers” sell normal goodsIncreased spending on normal goods indicates that is positive0 < EDI ≤ 1 so 0 < ≤ 5.2%
Slide4
Outward Shift in Demand Curve
Price
Quantity
D
2
D1SGreater demand at all pricesSlide5
How can retailers use this information?
Expect overall sales to increase up to 5.2%
Look at income elasticities of specific products to forecast quantity demanded