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10 Cards in this Set
- Front
- Back
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Consumption Function/schedule
(Concept) |
Shows relationship between disposable Income (Yd) , consumption (C) , and savings (S) .
Income = consumption + savings Yd= C+S $100= $90 + $10 |
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Keynes absolute income theory
(Theory) |
States that consumption is based on (or a function of ) disposable income.
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Autonomous consumption
(Term) |
Consumption not related to Yd (Disposable income). Level of consumption when Yd= zero.
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Dis-savings
(Term) |
Situation which occurs when consumption is greater than disposable income.
C > Yd |
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Break-even level of Yd
(Term) |
When consumption equals disposable income
C= Yd |
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Average propensity to consume (APC)
(Term) |
Formula of Consumption over disposable income
C/Yd APC+APS=100% |
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Average propensity to save (APS)
(Term) |
Formula, Savings over disposable income
S / Yd APC+APS=100% |
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Marginal propensity to consume (MPC)
(Term) |
Change in consumption over change in disposable income
^C / ^Yd MPC + MPS = 100 or 1. |
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Marginal propensity to save (MPS)
(Term) |
Change in savings over change in disposable income.
^S / ^Yd MPC + MPS = 100 or 1 |
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Non-income factors which influence consumption cause a shift in consumption curve.
(Concept) |
1. Wealth (increase in wealth causes consumption curve to shift left)
2. Future expectations ( If positive, left shift. negative, right shift. ) 3. Price (Price and consumption are negatively correlated) 4. Interest rates ( Interest rates and consumption are negatively correlated) 5. Stock of durable goods (If recently purchased then consumption curve shifts right.) 6. Level of debt (no debt, consumption curve shirts left) |
