ECO100Y5 Lecture Notes - Autarky, Inventory Optimization
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ECO100Y5 Full Course Notes
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Some is independent of income (automatic expenditure) Consumption expenditure theoretically should depend on past, present, and future income Past-borrowed a lot and repaying debt means that you can"t spend as much. Future depends on your decisionwhat you need(if you want to live comfortably after retirement means you save more) But your past and future does not matter, because what you have now dictates what you consume. B= change in consumption when there is a change to income ( When you have nothing to spend (no disposable income) but you still want to spend a--min consumption to survive-- Agrigate level1 dollar of that increase for disposable incomeis saved. When there is change in di causes change in c and s. Regardless of how high or low your dimpc (marginal propencity to consume) is always the same. Implies that mps is also the same. Average mpc will not rise proportionally to di. Thus with increase in di apc drops and aps rises.
