Changes in income can really change how people spend their money. This idea comes from something called utility theory.
When people earn more money, they can buy more things. This often makes them happier. But sometimes, having more money can lead to bad choices. People might spend too much and then have trouble with their finances later.
On the flip side, when people make less money, it can be tough for them. They might have to give up important things just to buy non-essential items.
Here are some of the challenges:
Overconsumption: When people earn more, they might spend money wastefully.
Diminishing Marginal Utility: This fancy phrase means that the more stuff people buy, the less happy they feel with each new item, which can lead to wasting money.
So, what can we do to help?
Budgeting: We should teach people how to create a budget. This way, they can focus on buying what they need.
Education: It's important to share knowledge about how to make smart choices with money and understand what utility means.
Changes in income can really change how people spend their money. This idea comes from something called utility theory.
When people earn more money, they can buy more things. This often makes them happier. But sometimes, having more money can lead to bad choices. People might spend too much and then have trouble with their finances later.
On the flip side, when people make less money, it can be tough for them. They might have to give up important things just to buy non-essential items.
Here are some of the challenges:
Overconsumption: When people earn more, they might spend money wastefully.
Diminishing Marginal Utility: This fancy phrase means that the more stuff people buy, the less happy they feel with each new item, which can lead to wasting money.
So, what can we do to help?
Budgeting: We should teach people how to create a budget. This way, they can focus on buying what they need.
Education: It's important to share knowledge about how to make smart choices with money and understand what utility means.