Disposable income (DI)
-income after taxes or net income
- DI =gross income - taxes
2 Choices
- W/ disposable income, households can either:
- consume (spend money on goods and services)
- save (not spend money on goods and services)
Consumption
- household spending
- the ability to consume is constrained by
> the amount of disposable income
> the propensity to save
-Do households consume if DI = 0 ?
> autonomous consumption
Saving
-household not spending
- the ability to save is constrained by
>the amount of disposable income
>the propensity to consume
-Do households save if DI = 0?
> no.
-- APS = S/DI = %DI that is not spent
FORMULAS
APC & APS
* APS + APC = 1
* 1 - APC = APS
* 1 - APS = APC
* APC > 1.: Dissaving
*-APS.: Dissaving
MPC & MPS
* marginal propensity to consume
- change in consumption/ change in DI
- % of every extra dollar earned that is spent
* marginal propensity to save
- change in savings/change in DI
- % of every extra dollar earned that is saved
* MPC + MPS = 1
* 1 - MPC = MPS
Your notes are easy to understand and is very useful and looks neat and simple. You probably should have made the more important information stand out or easier to see and adding visuals really help.You forgot to add the formula for finding MPC so you should add that to your notes. Other than that these are good notes
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