EC140 Lecture Notes - Lecture 4: Disposable And Discretionary Income, Autonomous Consumption, Consumption Function
21
EC140 Full Course Notes
Verified Note
21 documents
Document Summary
Learning objectives: explain the difference between desired and actual expenditure, identify determinants of desires consumption and investment, understand the meaning of equilibrium national income, explain how a change in desires expenditure affects equilibrium income through the simple multiplier. Key variables are y, c, i, g, x, im. Variable with a subscript a actual value: Variable without a subscript is the planned or desired amount: In our models we almost never worry about actual values. Gdp measured in expenditure is made up of: Ae = c + i + g + (x im) Autonomous expenditure does not change when income changes. Understand the basic mechanics of a macroeconomic model. Chapter 23- add changing prices after midterm 1. Disposable income per person- (cid:449)as(cid:374)"t (cid:272)ha(cid:374)gi(cid:374)g (cid:373)u(cid:272)h at the start. As income rises consumption rises and while consuming some you save the rest. In a model with no government or taxes, y. People buy consumption gods from disposable income, y.
