MARKETING ECONOMICS

Marketing Economics

Marketing Economics

Question 1

Optimizing Discretionary Income

Before going into the details for the steps that could be adopted by the rational consumers to optimize, one must understand the discretionary income. As per the Investopedia, the amount of an individual's income, which is left for investing, spending or for saving after fulfilling the personal necessities including food, shelter, utilities expenses and taxes have been paid. Secondly, one can also identify discretionary income is that the consumers spent on luxury items, non-essential goods and vacations. This is the income that basically derived from the disposable income, which is equal to gross income after deducting taxes.

From the consumer perspective, aggregate discretionary income levels for the economy witness fluctuation over time and the most typical situation was in the line of business activity. Discretionary income level is directly associated with the economy, for instance, if the economic output is strong in terms of GDP, than obviously the income level tends to be high. From the consumers' perspective, discretionary spending is an important and vital part of the economic activity because in such situations consumer spends money on the things like electronics, travelling and other recreational activities.

Steps for Optimizing Discretionary Income

All different form of consumer expenditures ultimately fall in the same pool that known as consumer's discretionary income. Therefore, based on the evidence regarding consumer's spending in a particular industry can be better understood in relation to the expenditures. From the marketers perspective, they are operating in unrelated and distinct industries that is the reason it is essential to understand how consumers as per in their budget limits make appropriate trade-offs between spending on apparel and food.

First and the basic step to initiate the optimization is to keep looking at the rates of the consumer items, for instance, how ...