1. Household Savings

Meaning of Saving

Saving occurs when a person sets aside part of their current income for future use.

Reasons for Saving

• Future Spending

  • People sacrifice current spending to use money later

Influences on Household Spending: Income

1. Introduction

Household spending mainly depends on the level of income a person or family earns.

👉 The higher the income, the more a household can usually spend.

2. Sources of Household Income

Households earn income from different sources:

What is Market Failure?

• Market failure occurs when the free market fails to allocate resources efficiently

• This leads to a mismatch between what is produced and what society actually needs

Causes of Market Failure

1. Public Goods

Definition

What is Market Failure?

• Market failure happens when the free market does NOT use resources efficiently.

• This means demand and supply alone cannot give the best outcome for society.

⚠️ Examples of Market Failure

• Under-provision (too little produced):

  • Education