Consumption Flashcards
1
Q
Whats the difference between APC and MPC?
A
APC refers to absolute income and consumption at a single point in time, but MPC refers to the ratio of change in income
2
Q
What are examples of durable goods?
A
Houses, Land
3
Q
What are examples of non durable goods?
A
Food and drinks
4
Q
What were Keynes’ 3 conjectures based on behaviour?
A
- MPC is between 0 and 1
- APC falls as income rises
- Income is the main determinant of consumption
5
Q
Why do poorer families have a higher MPC?
A
They spend a higher % of income on basic goods
6
Q
Why do some consumers deviate from expected spending?
A
Precautionary savings
