Purchasing power, an expression which is at the very heart of current debates. It keeps coming back, without us knowing exactly what it is, or even, what is its true definition.
As a citizen and consumer, you have every right to ask questions about the purchasing power and its definition. The editorial staff proposes, in response, a way for us to contribute both to broadening your perspectives in terms of terminology, but also to help you understand things better.
Definition of purchasing power: what are the elements to be taken into consideration?
In the expression “purchasing power“there is the term power which refers to capacity and aptitude. But there is also that of purchase to speak generally of all the transactions carried out by a person, to acquire any good or service.
Therefore, it is possible to propose a definition of purchasing power. And that is: it's a way of measuring revenue efficiency of a foyer to provide all necessary goods and services.
Purchasing power: a definition that revolves around an important measure within the national economy
Indeed, this is the perfect way to determine to what extent all citizens, or individuals, are able to support themselves, for different transactions. Among which we can cite the following:
- the purchase of foodstuffs;
- the purchase of clothes, medicines;
- payment of various invoices;
- different services such as care and others.
Is the definition of purchasing power individual?
In seeking the definition of purchasing power, another question arises: is it an individual definition, or does it refer to a group of people? The definition of purchasing power is based on two elements, to know :
- household income;
- the latter's ability to be exchanged for goods and services.
However, does this definition concern each household individually, or does it target the aptitudes of a whole community, or a certain social class? Economics specialists explain that the definition of purchasing power is both individual and collective. Which makes it a value that can be used in several ways, which would serve as a measurement tool on several levels.
Why is it so important to know the definition of purchasing power?
It is quite natural that the citizen of 2022 imperatively seeks to know the definition of purchasing power. Especially since this expression is become recurrent in the news, that the various media use it all the time. This is to talk about the economic situation of the majority of citizens in France, or elsewhere in the world.
Moreover, knowing that purchasing power is falling may make people panic. Knowing what purchasing power is will enable people to cope well with the situation, knowing exactly what to do.
Why has the expression of purchasing power been constantly in the news for some time now?
The media have been talking about purchasing power for some time now, without addressing its definition. The reason for this interest is the delicate situation the world is going through in general. But also the inability of some households in France to make ends meet, especially with low incomes.
The definition of purchasing power implies knowing the elements that cause it to rise or fall, and knowing the problem is the first step to do to solve it.
What to remember about the definition of purchasing power
To recap all of this, remember that the definition of purchasing power applies to both:
- to each individual;
- to every household;
- to each community or social class.
But also that the definition of purchasing power is essentially based on quantity and quality of purchases and service that a unit of salary will allow you to buy. The harder it is for you to buy these things, the lower the purchasing power.
