1.18 How would the change in real wealth be expected to influence the consumption function and saving function between 2003 and 2012? Draw graphs to illustrate the changes. UK household wealth increased from £4.34 trillion in 2003 to

£7.05 trillion in 2012, a 62 per cent increase. During the same period, the CPI rose 29 per cent. Average household wealth in 2012 was £255,000, but the wealth gap between the rich and poor has increased. The richest 10 per cent had 22 times more wealth than the poorest 50 per cent. Consumer spending increased in 2012 at the time of the London Olympics.

Source: The Independent, 8 April 2013 Additional information: between 2003 and 2012, real consumption expenditure increased by 7 per cent and real disposable income increased by 9 per cent.