According to the existing tradition, it is necessary to evaluate the role of cash incomes in the formation of the consumption market not only by comparing the growth rates of incomes and retail turnover, noting the realized potential of the market in terms of turnover, but also in terms of cash incomes of the possibility of developing the consumer market, but also how real income is correlated with the growth of both production volumes and labor productivity.
Real disposable income is directly related not only to the sphere of their sale, but primarily to the sphere of its formation. The main share in the amount of cash income is occupied by wages, which form the total annual income and which acts as the price of labor as a factor of production. Therefore, the growth of wages and, as a consequence, real income should be associated with an increase in output.
To study this relationship - changes in the volume of consumer goods and the amount of cash income, you can use the well-known formula proposed in any textbook on economics. According to her, it is logical to assume that with the effective functioning of the national economy, the growth of production should outstrip the growth of income and only in this way affect real income. However, this is not always observed and does not always depend on the state strategy in the field of adjusting the consumer market
If the lead coefficient is lower than unity, then by the nature of its manifestation in the consumer market, it can be judged that the state is pursuing a policy of “expensive money” when the volume of production is tied to the price of one of the most important factors of production (labor). If it is more than one, then the state pursues a policy of “cheap money”, mainly aimed at stimulating consumption. And it can be considered effective if it contributes to the revitalization of the domestic consumer market: the growth of production and sale of domestic consumer goods, the reduction of inventories.
If a policy of “expensive money” was pursued in a country or region in order to stabilize the economy and slow down inflation, this naturally reduced the real income of residents. As a rule, such a policy is accompanied by an underestimated inventory indicator and low consumer market activity. Such a regime is maintained in order to saturate the market with consumer goods and prevent income growth outpacing without a corresponding increase in production rates, which would inevitably provoke inflation and, in turn, again lead to the fact that real income would begin to fall.
When the growth rate of income is almost equal to the growth rate of production and labor productivity, which generally makes the region’s market stable enough, but not sufficiently balanced in terms of matching supply with demand, since inventory in retail trade rises sharply and the market lives in a state of "expectation" of increased consumer activity. For example, such a situation may arise when a “cheap money” policy was pursued in a country or region, which can be attributed to the fact that the production of consumer goods increased significantly in the previous year, but not all manufactured goods were sold. Therefore, faster growth in income compared with the growth in the production of goods was aimed at stimulating consumption and, as a result, reducing the value of inventories.
The stable state of the consumer market is always characterized not so much by an increase in income, turnover and production of goods, as by optimization of goods in the region and the ability to consider such an effect of the obtained result on the state of inventories in the sphere of circulation. Thus, by comparing the obtained indicators of the advancing coefficient with the value of inventories in retail, it is possible to evaluate the result of state policy in the field of market regulation through the mechanism of formation and implementation of population incomes.