Consumption and Savings
Disposable income:
-Income after taxes or net income
- DI = Gross income – Taxes
2 Choices
-without disposable income, households can either consume, or save
-without disposable income, households can either consume, or save
Consumption
-Household spending
-Ability to consume is constrained by
>the amount of disposable income
>the propensity to save
-Household spending
-Ability to consume is constrained by
>the amount of disposable income
>the propensity to save
Do households consume if DI = 0
-
Autonomous consumption
-
Dissaving
-
APC = C/ DI = % DI that is spent
Saving
- Household Spending
- Ability to consume is constrained by
>the amount of disposable income
- Ability to consume is constrained by
>the amount of disposable income
>the
propensity to consume
- Do household have if DI = 0
- Do household have if DI = 0
>No
- APS = S/DI = % DI that’s not spent
-APC + APS = 1
- 1- APC = APS
- 1- APS = APC
-Marginal propensity to consume
-C/ DI
- % of
every extra $ earned that is saved
- MPC + MPS = 1
- 1- MPC = MPS
- 1 – MPS = MPC
Determinants of C & S
-Wealth
-Expectations
-Household Debt
-Taxes
Nice blog. It looks nice and clean. I like how you separated the different sections,makes it easier to understand. The video helps with the understanding of the content.The one thing you should do is add some examples for APC, APS, MPC, and MPS.
ReplyDelete