Disposable income
is total personal income minus personal current taxes.[1] In national accounts
definitions, personal income, minuspersonal current taxes equals disposable personal income.
[2]
Subtracting personal outlays (which includes the major category of personal (or, private) consumption
expenditure) yields personal (or, private) savings.
Restated, consumption expenditure plus savings equals disposable income[3] after accounting for
transfers such as payments to children in school or elderly parents’ living arrangements.[4]
The marginal propensity to consume (MPC) is the fraction of a change in disposable income that is
consumed. For example, if disposable income rises by $100, and $65 of that $100 is consumed, the MPC
is 65%. Restated, the marginal propensity to save is 35%.
Discretionary income is income after subtracting taxes and normal expenses (such as rent or mortgage,
utilities, insurance, medical, transportation, property maintenance, child support, inflation, food and
sundries, &c.) to maintain a certain standard of living.[5] It is the amount of an individual's income available
for spending after the essentials (such as food, clothing, and shelter) have been taken care of:
Discretionary income = Gross income - taxes - necessities
Despite the formal definitions above, disposable income is commonly used to denote discretionary
income. The meaning should therefore be interpreted from context. Commonly, disposable income
is the amount of "play money" left to spend or save. The Consumer Leverage Ratio is the
expression of the ratio of Total Household Debt to Disposable Income.
What Does Discretionary Income Mean?
The amount of an individual's income that is left for spending, investing or saving after taxes and personal
necessities (such as food, shelter, and clothing) have been paid. Discretionary income includes money
spent on luxury items, vacations and non-essential goods and services.
Discretionary income is derived from disposable income, which equals gross income minus taxes.
Aggregate discretionary income levels for an economy will fluctuate over time, typically in line with
business cycle activity. When economic output is strong (as measured by GDP or other gross measure),
discretionary income levels tend to be high as well. If inflation occurs in the price of life's necessities, then
discretionary income will fall, assuming that wages and taxes remain relatively constant.
Discretionary spending is an important part of a healthy economy - people will only spend money on
things like travel, movies and consumer electronics if they have the funds to do so. Some people will use
credit cards to purchase discretionary goods, but increasing personal debt is not the same as having
discretionary income.
Disposable income is the income that is left over after an individual has paid all personal income taxes.
This is a very importantmeasure to determine not only an individual's overall economic health but the
health of society as a whole. Disposable income is one of the primary measures of personal wealth but it
is not the only measure that can be used
Some of the important causes for the growth of rural markets are – * The rise
in disposable income of the rural families
Disposable Income:
The amount of money that individuals have after removing taxes and other required
payments.Disposable income is then available to spend as the consumer wishes. See also discretionary
income.
Disposable income after-tax income, which is used for spending or saving
Levels of average disposable income.
Taxation policy in the target market.
Economic indicators such as inflation levels, interest rates, exchange rates and unemployment.
Is the political and legal landscape changing in any way?
In other cases group assignment is specific, such as offering student prices under the assumption that
students have less disposable income and therefore will be more likely to forgo the purchase if required
to pay the full price.
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Discretionary Income Money left after paying taxes and buying necessities.
Disguised Survey A technique in which the respondent is not told the real purpose of a researchstudy.
Marketers love to target the DINKS and SINKS because they have lots of discretionary incomeand no
children to spend it on, so they spend their extra money on themselves, their house, their pets and
vacations.
Discounters operations that take short-term leases in unlet units in malls, selling such items as
stationery, toys, confectionery and gifts at deeply discounted prices
Discretionary income disposable income that is available for ...
GDP adjusted to ppp
Purchasing power parity (PPP) is a theory of long-term equilibrium exchange rates based on relative
price levels of two countries. The idea originated with the School of Salamanca in the 16th century [1] and
was developed in its modern form by Gustav Cassel in 1918.[2] The concept is founded on the law of one
price; the idea that in absence of transaction costs, identical goods will have the same price in different
markets.
The exchange rate reflects transaction values for traded goods among countries in contrast to non-traded
goods, that is, goods produced for home-country use. Also, currencies are traded for purposes other than
trade in goods and services, e.g., to buy capital assets whose prices vary more than those of physical
goods. Also, different interest rates, speculation, hedging or interventions by central banks can influence
the foreign-exchange market.
The PPP method is used as an alternative to correct for possible statistical bias. The Penn World Table is
a widely cited source of PPP adjustments, and the so-called Penn effect reflects such a systematic bias in
using exchange rates to outputs among countries.
For example, if the value of the Mexican peso falls by half compared to the U.S. dollar, the Mexican Gross
Domestic Product measured in dollars will also halve. However, this exchange rate results from
international trade and financial markets. It does not necessarily mean that Mexicans are poorer by a half;
if incomes and prices measured in pesos stay the same, they will be no worse off assuming that imported
goods are not essential to the quality of life of individuals. Measuring income in different countries using
PPP exchange rates helps to avoid this problem.
PPP exchange rates are especially useful when official exchange rates are artificially manipulated by
governments. Countries with strong government control of the economy sometimes enforce official
exchange rates that make their own currency artificially strong. By contrast, the currency's black market
exchange rate is artificially weak. In such cases a PPP exchange rate is likely the most realistic basis for
economic comparison.
Per Capita Income
Meaning and Significance
Per capita Income means how much an individual earns, of the yearly income that is generated in the country through
productive activities. It means the share of each individual when the income from the productive activities is divided
equally among the citizens. Per capita income is reported in units of currency. Per capita income reflects the gross
national product of a country. Per capita income is also a measure of the wealth of a population of a nation when
compared with other countries. It is expressed in terms of commonly used international currency such as Euro,
Dollars because these currencies are widely known.
Per Capita Income In India
India's per capita income is found by the Atlas method and by employing official exchange rates for conversion.
Further, this Atlas method of calculating the per capita income of India is not determined by using purchasing power
parity, which essentially adjusts exchange rates for purchasing power of currencies.
Economist have been giving considerable importance to the performance of states vis a vis each other in terms of per
capita income. It has been observed that those states that were more open and better adapted to economic
liberalization have overall shown faster rate of growth.
T he per capita income grew by 10.5 per cent to Rs 44,345 in 2009-10 against Rs 40,141 in the year-ago period,
according to the government data.
The per capita income was slightly higher than Rs 43,749 as calculated by the Central Statistical Organisation (CSO)
in its advance estimates for FY10. However, per capita income grew by 5.6 per cent last fiscal if it is calculated on the
basis of 2004-05 prices, which is a better way of comparison and broadly factors inflation.
Per capita income (at 2004-05 prices) stood at Rs 33,588 in FY10 against Rs 31,821 in the previous year, according
to estimates of national income released.
Per capital income means income of each Indian if national income is evenly divided among the country's population
of 117 crore (Rs 1.17 billion).
The size of the economy rose to Rs 62,31,171 crore (Rs 62.3 trillion) in the last fiscal, up 11.8 per cent over Rs
55,74,449 crore (Rs 55.7 trillion) in FY09.
Population below poverty line: 25% (2007 est.)
Rank: 85
Definition: National estimates of the percentage of the population falling
below the poverty line are based on surveys of sub-groups, with the results
weighted by the number of people in each group. Definitions of poverty vary
considerably among nations. For example, rich nations generally employ more
generous standards of poverty than poor nations.
Source: CIA World Factbook - Unless otherwise noted, information in this
page is accurate as of February 19, 2010
inflation stood at 15.10%
