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Marginal Propensity To Consume
In economics, the marginal propensity to consume (MPC) is a metric that quantifies induced consumption, the concept that the increase in personal consumer spending ( consumption) occurs with an increase in disposable income (income after taxes and transfers). The proportion of disposable income which individuals spend on consumption is known as propensity to consume. MPC is the proportion of additional income that an individual consumes. For example, if a household earns one extra dollar of disposable income, and the marginal propensity to consume is 0.65, then of that dollar, the household will spend 65 cents and save 35 cents. Obviously, the household cannot spend ''more'' than the extra dollar (without borrowing or using savings). If the extra money accessed by the individual gives more economic confidence, then the MPC of the individual may well exceed 1, as they may borrow or utilise savings. According to John Maynard Keynes, marginal propensity to consume is less than one. ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] [Amazon] |
Economics
Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interactions of Agent (economics), economic agents and how economy, economies work. Microeconomics analyses what is viewed as basic elements within economy, economies, including individual agents and market (economics), markets, their interactions, and the outcomes of interactions. Individual agents may include, for example, households, firms, buyers, and sellers. Macroeconomics analyses economies as systems where production, distribution, consumption, savings, and Expenditure, investment expenditure interact; and the factors of production affecting them, such as: Labour (human activity), labour, Capital (economics), capital, Land (economics), land, and Entrepreneurship, enterprise, inflation, economic growth, and public policies that impact gloss ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] [Amazon] |
Keynesian Economics
Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomics, macroeconomic theories and Economic model, models of how aggregate demand (total spending in the economy) strongly influences Output (economics), economic output and inflation. In the Keynesian view, aggregate demand does not necessarily equal the aggregate supply, productive capacity of the economy. It is influenced by a host of factors that sometimes behave erratically and impact production, employment, and inflation. Keynesian economists generally argue that aggregate demand is volatile and unstable and that, consequently, a market economy often experiences inefficient macroeconomic outcomes, including economic recession, recessions when demand is too low and inflation when demand is too high. Further, they argue that these economic fluctuations can be mitigated by economic policy responses coordinated between a government and their central bank. ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] [Amazon] |
Marginal Propensity To Save
The marginal propensity to save (MPS) is the fraction of an increase in income that is not spent and instead used for saving. It is the slope of the line plotting saving against income. For example, if a household earns one extra dollar, and the marginal propensity to save is 0.35, then of that dollar, the household will spend 65 cents and save 35 cents. Likewise, it is the fractional decrease in saving that results from a decrease in income. The MPS plays a central role in Keynesian economics Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomics, macroeconomic theories and Economic model, models of how aggregate demand (total spending in the economy) strongl ... as it quantifies the saving-income relation, which is the flip side of the consumption-income relation, and according to Keynes it reflects the fundamental psychological law. The marginal propensity to save is also a key variable in determ ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] [Amazon] |
Consumer Theory
The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves. It analyzes how consumers maximize the desirability of their consumption (as measured by their preferences subject to limitations on their expenditures), by maximizing utility subject to a consumer budget constraint. Factors influencing consumers' evaluation of the utility of goods include: income level, cultural factors, product information and physio-psychological factors. Consumption is separated from production, logically, because two different economic agents are involved. In the first case, consumption is determined by the individual. Their specific tastes or preferences determine the amount of utility they derive from goods and services they consume. In the second case, a producer has different motives to the consumer in that they are focussed on the profit they make. This is explained further by producer theory. The models ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] [Amazon] |
Average Propensity To Consume
In ordinary language, an average is a single number or value that best represents a set of data. The type of average taken as most typically representative of a list of numbers is the arithmetic mean the sum of the numbers divided by how many numbers are in the list. For example, the mean or average of the numbers 2, 3, 4, 7, and 9 (summing to 25) is 5. Depending on the context, the most representative statistic to be taken as the average might be another measure of central tendency, such as the mid-range, median, mode or geometric mean. For example, the average personal income is often given as the median the number below which are 50% of personal incomes and above which are 50% of personal incomes because the mean would be higher by including personal incomes from a few billionaires. General properties If all numbers in a list are the same number, then their average is also equal to this number. This property is shared by each of the many types of average. Another universal p ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] [Amazon] |
Average Propensity To Save
In Keynesian economics, the average propensity to save (APS), also known as the savings ratio, is the proportion of income which is saved, usually expressed for household savings as a fraction of total household disposable income (taxed income). APS=\frac The ratio differs considerably over time and between countries. The savings ratio for an entire economy can be affected by (for example) the proportion of older people (as they have less motivation and capability to save), and the rate of inflation (as expectations of rising prices can encourage people to spend now rather than later) or current interest rates. APS can express the social preference for investing in the future over consuming in the present. The complement (1 minus the APS) is the average propensity to consume (APC). Low average propensity to save might be the indicator of a large percentage of old people or high percentage of irresponsible young people in the population. With income level changes, APS becomes an ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] [Amazon] |
Consumer Surplus
In mainstream economics, economic surplus, also known as total welfare or total social welfare or Marshallian surplus (after Alfred Marshall), is either of two related quantities: * Consumer surplus, or consumers' surplus, is the monetary gain obtained by consumers because they are able to purchase a product for a price that is less than the highest price that they would be willing to pay. * Producer surplus, or producers' surplus, is the amount that producers benefit by selling at a market price that is higher than the least that they would be willing to sell for; this is roughly equal to profit (since producers are not normally willing to sell at a loss and are normally indifferent to selling at a break-even price). The sum of consumer and producer surplus is sometimes known as social surplus or total surplus; a decrease in that total from inefficiencies is called deadweight loss. Overview In the mid-19th century, engineer Jules Dupuit first propounded the concept of econ ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] [Amazon] |
Average Propensity To Consume
In ordinary language, an average is a single number or value that best represents a set of data. The type of average taken as most typically representative of a list of numbers is the arithmetic mean the sum of the numbers divided by how many numbers are in the list. For example, the mean or average of the numbers 2, 3, 4, 7, and 9 (summing to 25) is 5. Depending on the context, the most representative statistic to be taken as the average might be another measure of central tendency, such as the mid-range, median, mode or geometric mean. For example, the average personal income is often given as the median the number below which are 50% of personal incomes and above which are 50% of personal incomes because the mean would be higher by including personal incomes from a few billionaires. General properties If all numbers in a list are the same number, then their average is also equal to this number. This property is shared by each of the many types of average. Another universal p ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] [Amazon] |
Multiplier (economics)
In macroeconomics, a multiplier is a factor of proportionality that measures how much an endogenous variable changes in response to a change in some exogenous variable. For example, suppose variable ''x'' changes by ''k'' units, which causes another variable ''y'' to change by ''M'' × ''k'' units. Then the multiplier is ''M''. Common uses Two multipliers are commonly discussed in introductory macroeconomics. Commercial banks create money, especially under the fractional-reserve banking system used throughout the world. In this system, money is created whenever a bank gives out a new loan. This is because the loan, when drawn on and spent, mostly finishes up as a deposit back in the banking system and is counted as part of money supply. After putting aside a part of these deposits as mandated bank reserves, the balance is available for the making of further loans by the bank. This process continues multiple times, and is called the multiplier effect. The multiplier m ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] [Amazon] |
Marginal Propensity To Save
The marginal propensity to save (MPS) is the fraction of an increase in income that is not spent and instead used for saving. It is the slope of the line plotting saving against income. For example, if a household earns one extra dollar, and the marginal propensity to save is 0.35, then of that dollar, the household will spend 65 cents and save 35 cents. Likewise, it is the fractional decrease in saving that results from a decrease in income. The MPS plays a central role in Keynesian economics Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomics, macroeconomic theories and Economic model, models of how aggregate demand (total spending in the economy) strongl ... as it quantifies the saving-income relation, which is the flip side of the consumption-income relation, and according to Keynes it reflects the fundamental psychological law. The marginal propensity to save is also a key variable in determ ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] [Amazon] |
Induced Consumption
Induced consumption is the portion of Consumption (economics), consumption that varies with Disposable and discretionary income, disposable income. When a change in disposable income “induces” a change in consumption on goods and services, then that changed consumption is called “induced consumption”. In contrast, expenditures for autonomous consumption do not vary with income. For instance, expenditure on a consumable that is considered a normal good would be considered to be induced. In the simple linear consumption function, C = a + b \times Y_ induced consumption is represented by the term b \times Y_, where Y_ denotes disposable income and b is called the marginal propensity to consume. See also * Lifestyle creep * Diderot effect * Induced demand References Consumption (macroeconomics) {{Econ-stub ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] [Amazon] |
Consumption Function
In economics, the consumption function describes a relationship between consumption and disposable income. The concept is believed to have been introduced into macroeconomics by John Maynard Keynes in 1936, who used it to develop the notion of a government spending multiplier. Details Its simplest form is the ''linear consumption function'' used frequently in simple Keynesian models: :C = a + b \cdot Y_ where a is the autonomous consumption that is independent of disposable income; in other words, consumption when disposable income is zero. The term b \cdot Y_ is the induced consumption that is influenced by the economy's income level Y_. The parameter b is known as the marginal propensity to consume, i.e. the increase in consumption due to an incremental increase in disposable income, since \partial C / \partial Y_ = b. Geometrically, b is the slope of the consumption function. Keynes proposed this model to fit three stylized facts: * People typically spend a part, ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] [Amazon] |
