CHAPTER 24 CONSUMPTION

Question 1

Average propensity to consume

Answer 1

The proportion of total income spent. Calculated by C / Y

Question 2

Average propensity to save

Answer 2

The proportion of total income saved. Calculated by S / Y

Question 3

Consumption

Answer 3

Total expenditure by households on goods and services over a period of time

Question 4

Consumption function

Answer 4

The relationship between consumption of households and the factors which determine it.

Question 5

Disposable income

Answer 5

Household income over a period of time including state taxes, less direct taxes

Question 6

Durable goods

Answer 6

Goods which are consumed over a long period of time e.g television set or car

Question 7

Marginal propensity to consume

Answer 7

The proportion of a change in income spent

Question 8

Marginal propensity to save

Answer 8

The proportion of a change in income saved

Question 9

Non-durable goods

Answer 9

Goods which are consumed almost immediately e.g ice cream or packet of washing powder

Question 10

Savings function

Answer 10

The relationship between the savings of households and the factors which determine it

Question 11

Saving (personal)

Answer 11

The proportion of households disposable income which is not spent over a period of time

Question 12

Wealth effect

Answer 12

The change in consumption following a change in wealth