Consumption & savings

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  • Created by: Lottie
  • Created on: 29-04-12 17:38

CONSUMPTION

  • House spending- 2/3 of totoal AD
  • Positive relationship betweeen disposable Y and consumer spending
  • gradient of consumption function gives MPC
  • Average propensity to consume= total consumption divided by total Y
  • Marginal propensity to consume= change in consumption resulting from change in disposable Y

SAVING

  • saving is an act of postponing consumption
  • average propensityy to save= porportion of disposable Y  that is saved rather than spent
  • marginal propensity to save is the change…

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