In recent years consumers allocation of income has

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Unformatted text preview: use for food, shelter, clothing, and transportation. Thus, if taxes rise at a faster rate than does income, consumers must economize. In recent years, consumers’ allocation of income has shifted. As the marketplace has become more efficient, producing products that are more durable and use less energy, consumers have increased their disposable income. Car maintenance costs, for example, have declined 28 percent since 1985, because automobile quality has improved. Much of the money is being spent on new categories of “necessities” such as vitamins and supplements; antibacterial body washes, lotions, and deodorants; antiwrinkle creams; and children’s shampoos, toothpaste, and bath products.16 Discretionary Income The third component of income is discretionary income, the money that remains after paying for taxes and necessities. Discretionary income is used for luxury items such as a cruise on the Queen Mary 2. An obvious problem in defining discretionary versus disposable income is determining w...
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