Personal Income and Consumer Context

The main factor determining the magnitude and structure of demand in the consumer market is the personal income of the population. The income factor, unlike the price, is considered to be the direct determinant of demand. The character of this dependence was once expressed by JM Keynes, who wrote that the tendency of people to increase their needs, and then, naturally, consumption, is a special psychological law of the nature of man, which, ultimately, attracts it to increase and Personal disposable income.

In principle, the hypothesis of absolute income was formulated and developed earlier by E. Engel. According to the well-known law of Eingel, the structure of purchases and expenditures of the population can vary significantly depending on the level of income: the lower the income, the more it is spent for food (meeting the needs of the person) and, conversely, the higher the level of income, the greater part it goes to Satisfaction of the "secondary" needs of man as a social object. In addition, it is significant that, as a rule, 1% increase in income among low-income segments of the population, as a rule, causes a more active response of consumers than the same indicator among the wealthy strata.

Theoretically, the problem of how personal incomes of income and market conditions are interrelated was studied mainly in the context of the impact of the purchasing power of the population on the value of turnover. However, the interaction of the income of the population and the consumer goods market , in our view, should be considered in a broader sense, namely: from the position of a systematic approach to the analysis of the unity of supply and demand. The successful and dynamic development of the consumer market in the region, the achievement of a balance in it, are directly related to measures of state revenue regulation aimed at stabilizing the standard of living, forming a middle class of consumers, expanding consumer demand, and stimulating the production of goods and services.

Personal income in economic theory is traditionally defined as a certain amount of money that a person receives for any period. But in a market economy, this approach to determining what constitutes a personal income, needs a number of significant refinements. The reason for this is that, firstly, in the conditions of a market economy, personal income is channeled primarily to purchase goods and services for personal consumption. And secondly, in a market economy, any personal income must be provided with an appropriate number of these goods and services, because only under this condition a person retains a material interest in labor.

In the regional aspect, the income of the population is the dominant factor determining the success of the formation and subsequent development of the consumer market.

Theoretically, it is proved that the demand initiating the supply volume on it is a derived parameter from the indicators of the monetary incomes that the population directs to consumer needs and determines the level of their welfare.

When assessing the level of income from the position of its influence on solvent demand in the market of consumer services and goods, it is important to correctly establish the value of purchasing power, which is determined by adjusting money incomes taking into account prices and acting as a real income.

However, at the present time it is necessary to judge objectively about the real parameter of solvent demand of the population by introducing both indicators of the structure of expenditures and the harmony of their ratios.