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High-Income Household Borrowing vs. Low-Income Household

Explain the reasons why a high-income household may borrow more than a low-income household.

Category:

Labor Market and Income Distribution

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Answer

1. Understand the key points: Before starting to write the essay, make sure to understand the key points that need to be covered. In this case, the essay needs to explain why high-income households may borrow more than low-income households, and discuss the implications for the economy and society.

2. Use examples and evidence: To support the arguments made in the essay, it is important to use examples and evidence. For instance, when discussing why banks may be more willing to lend to high-income households, it can be helpful to provide examples of jobs that are more secure and likely to experience income growth.

3. Consider the broader implications: While the essay focuses on the reasons why high-income households may borrow more than low-income households, it is important to consider the broader implications of this trend. For example, the essay could discuss how this may exacerbate income inequality and limit access to credit for low-income households, and explore potential solutions to address these disparities.

STEPS TO WRITE ESSAY 💡MAIN POINTS💡OVERVIEW

I. Introduction

Borrowing is a common practice for households, regardless of their income level. However, high-income households may borrow more than low-income households. This essay explores the reasons why this is the case and discusses the implications for the economy and society.

II. Banks may be more willing to lend to high-income households

➡️High-income households may be more attractive to lenders because they are perceived as being more creditworthy.

Banks may be more confident that they will be repaid and may, therefore, be more willing to lend to high-income households. This increased confidence may lead to banks charging lower interest rates for high-income households.

➡️Furthermore, high-income households may have greater job security and expect income to rise, which further increases their creditworthiness.

III. High-income households may have significant wealth and assets

➡️High-income households may have significant wealth and assets that they can offer as collateral.

This collateral can be used to secure loans, allowing high-income households to borrow more than low-income households.

➡️ In addition, high-income households may borrow for big-ticket items and luxuries, such as buying a second home or a luxury car.

These purchases may be motivated by a desire to increase or maintain their status and living standards.

IV. Comparison with low-income households

Low-income households may have less access to credit than high-income households. This may be due to factors such as a lack of credit history, lower credit scores, or limited collateral. Additionally, low-income households may have less job security and income stability, which may make lenders more hesitant to lend to them. As a result, low-income households may borrow for necessities rather than luxuries, such as paying for medical expenses or essential home repairs.

V. Conclusion

High-income households may borrow more than low-income households due to factors such as increased creditworthiness and significant wealth and assets. This has implications for the economy and society, as it may exacerbate income inequality and limit access to credit for low-income households. Future research could explore ways to address these disparities, such as increasing access to credit for low-income households and promoting financial literacy. Policymakers could also consider implementing regulations to ensure that lenders are not discriminating against low-income households. Ultimately, understanding the reasons why high-income households borrow more than low-income households is important for creating a more equitable and sustainable economic system.

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High-Income Households Borrowing More than Low-Income Households

I. Introduction
A. Explanation of the Topic
This essay will explore the reasons why high-income households borrow more than low-income households. It will discuss the advantages that high-income households have when it comes to borrowing, as well as the disadvantages that low-income households face.

B. Importance of Understanding the Reasons Why High-Income Households Borrow More than Low-Income Households
It is important to understand why high-income households borrow more than low-income households in order to understand the implications for the economy and society as a whole. This essay will provide an in-depth analysis of the reasons why high-income households borrow more than low-income households.

II. Banks May Be More Willing to Lend to High-Income Households
A. Explanation of Why Banks May Be More Confident of Being Repaid
Banks may be more willing to lend to high-income households because they are more confident of being repaid. High-income households may have greater job security and expect their income to rise, making them more likely to be able to repay their loans.

B. Discussion of How Banks May Charge a Low Interest Rate for High-Income Households
Banks may also be willing to charge a lower interest rate for high-income households, as they are more likely to be able to repay their loans. This can be beneficial for high-income households, as they can access credit at a lower cost.

C. Examples of How High-Income Households May Have Greater Job Security and Expect Income to Rise
For example, high-income households may have jobs in the finance or technology sectors, which are more secure and likely to experience income growth. This makes them more attractive to banks when it comes to lending.

III. High-Income Households May Have Significant Wealth and Assets
A. Explanation of How High-Income Households May Offer Collateral
High-income households may also have significant wealth and assets that they can use as collateral when borrowing. This can make them more attractive to banks, as they are more likely to be able to repay their loans.

B. Discussion of How High-Income Households May Borrow for Big-Ticket Items and Luxuries
High-income households may also borrow for big-ticket items and luxuries, such as cars, holidays, and home improvements. This can be beneficial for high-income households, as they can access credit to purchase items that they may not be able to afford otherwise.

C. Examples of How High-Income Households May Borrow to Increase/Maintain Status and Living Standards
For example, high-income households may borrow to maintain their status and living standards, such as by purchasing a luxury car or taking a holiday. This can be beneficial for high-income households, as it can help them to maintain their lifestyle.

IV. Comparison with Low-Income Households
A. Explanation of How Low-Income Households May Have Less Access to Credit
In comparison, low-income households may have less access to credit. This can be due to a number of factors, such as having less job security and income stability, as well as having fewer assets to offer as collateral.

B. Discussion of How Low-Income Households May Have Less Job Security and Income Stability
Low-income households may also have less job security and income stability, making them less attractive to banks when it comes to lending.

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