Households
Microeconomic Decision Makers
Cultural attitudes and social norms also shape behaviour.
- In some cultures, saving is strongly encouraged and borrowing is frowned upon, so households save a high proportion of income.
- In others, to buy goods is socially acceptable, so households spend and borrow more and save less.
Common exam question
Influences on how much households save
Question: Identify two influences on the share of income households save, or explain two reasons why saving may fall (2–4 marks).
Asked in 1 of the 11 structured papers as a 2-mark identify, and the specimen mark scheme sets the 4-mark explain. For Identify, any two credited influences score, and only your first three answers are read: income or wealth, the rate of interest, confidence, age or the number of dependants, culture, the cost of living, and the availability of saving schemes.
For Explain, one mark for each reason and one for its effect, so state the direction of each change: income falls, so more of it goes on necessities; the interest rate is cut, so saving earns a smaller reward; confidence rises, so a safety net seems less needed; more people are retired and using up their savings; borrowing to buy goods becomes socially acceptable.