ECO209Y1 Lecture Notes - Autonomous Consumption, Consumption Function, Shortage
Document Summary
Slide 9: desire consumption expenditure, aggregate all consumers, depends on, disposable income: important factor, wealth: saved money reason to save, expenditure in the future, expected deflation, interest rate: buying on credit, expectation about the future. Slide 10,11 the consumption function: consumption function as a function of disposable income, constant c bar: takes just one value, c bar: autonomous consumption, constant c: rate of change of consumption as disposable income changes. Slide 12 marginal propensity to consume: there are no ta, taxes or tr, transfer payments since no gov"t, therefore yd = y, consumption is depend on income(y) alone: c= cbar + cy. Slide 14: people are reducing levels of savings, consumption is increasing faster than disposable income, mid 1980, higher concentration of income, cheap to borrow money, contributed to the increase of consumption increase. Slide 16: since yd = c+s, saving function is given by s= yd c. Slide 24: close gaps between production and demand by adjusting inventory.
