ECON 1020 Lecture Notes - Lecture 56: Disposable And Discretionary Income, Consumption Function

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erinchimpanzee657

17 May 2017

School

University of Manitoba

Department

Economics

Course

ECON 1020

Professor

Ryan A.Compton

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ECON 1020 Full Course Notes

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Document Summary

Disposable income (di): money you have left from income after paying taxes. Consumption schedule (c): shows amounts households plan to spend for consumer goods at different levels of disposable income. Higher disposable income = higher consumption (positive relationship) Saving schedule (s): shows amounts households plan to save at different levels of disposable income. Savings = disposable income consumption: dissaving can occur (consuming more than disposable income) o higher disposable income = higher savings (positive relationship) Average propensities to consume (apc) = consumption / income. Average propensities to save (aps) = saving / income. Marginal: if you get one more dollar of saving or consumption, how much will income change. Marginal propensities to consume (mpc) = change in consumption / change in income. Marginal propensities to save (mps) = change in saving / change in income. Consumption and savings schedules (in billions) and propensities to consume and save. Gdp = income = disposable income (because there are no taxes)

Related Questions

The following table is a consumption schedule. Assume taxes and transfer payments are zero and that all saving is personal saving.

(GDP = DI)	C	S	APC	APS
$1,500	$1,540	$_____	1.027	–0.027
$1,600	$1,620	_____	1.013	–0.013
$1,700	$1,700	_____	_____	_____
$1,800	$1,780	_____	0.989	0.011
$1,900	$1,860	_____	0.979	0.021
$2,000	$1,940	_____	_____	_____
$2,100	$2,020	_____	0.962	0.038
$2,200	$2,100	_____	_____	_____

Compute saving at each of the eight levels of disposable income and the missing average propensities to consume and to save.

1. The break-even level of disposable income is $________.

2. As disposable income rises, the marginal propensity to consume remains constant. Between each two GDPs the MPC can be found by dividing $________ by $________, and is equal to _______.

3. The marginal propensity to save also remains constant when the GDP rises. Between each two GDPs the MPS is equal to $________ divided by $________, or to _______.