Profit
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Profit = Revenue - cost of production
Savings = income over and above consumption expenditure
Factors that affect savings are:
1. The level of income: it is the largest influence on consumption and savings. The higher a person's income, the more they can save and spend
2. The rate of inflation: people tend to save more of their incomes when inflation rises to protect the real value of their savings
3. Interest rates: people save more if the interest rate on savings rises
4. Availability of saving schemes: the more forms of savings available, the more people tend to save, and the less they spend
5. Government: if the government lowers taxes, people can afford to spend more and save more. Increasing benefits to unemployed or old age pensioners will not encourage people to save and provide for the old age
6. Personal factors: some people like to spend their money, others are more cautious and save some. People save as a precaution (in case of unemployment or ill health) or for a special purchase e.g. car or a holiday
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by: Admin
Total views: 794
Word Count: 672
Date: Sun, 21 May 2006 Time: 12:00 AM
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