There is a significant difference between purchasing power and buying power. Both these terms refer to the capacity of any individual or market segment’s purchasing power. These factors determine the capacity of those groups as they buy a certain amount of goods or products. Generally, high consumer buying power means that the consumer has a high income and more purchasing power that is relative to the demand and supply of the product. On the other hand, low purchasing power depicts that the consumer has low income and thereby he/she would be unable to buy any of the products at the latest market price.
It is really important that small business owners consider this factor in their minds whenever they are launching a product. They should know what is the average buying power of their target audience as well. They should make sure that the price range they are offering is affordable so the consumers can buy their products and they can reap the profit of their work as well. You can learn more about the relationship between purchasing power and business as you click on the link.
The purchasing power of an average consumer changes with time. For instance, in 1982 you the price of a loaf of bread was 0.37 pounds. Whereas, in the year 2019 we get the same thing for 1.24 pounds. This may not look like a significant hike but in reality, there is a rise of 235% on average buying power over these years.
Inflation is another important aspect of determining the average purchasing power. With the rise in inflation, we see a dramatic decrease in purchasing power as well. This may happen due to various economic and financial reasons. Moreover, we see how purchasing power also affects the economics of any nation. We see how investments are highly dependent on the purchasing power as a low-risk investment has a lower profit as well.