Factors Affecting Consumption

Question 1

Gross income

Answer 1

Total income before tax

Question 2

Disposable income

Answer 2

Income after tax

Question 3

Discretionary income

Answer 3

Income to spend after neccesities

Question 4

MPC

Answer 4

Marginal propensity to consume

How much of an increase in income you are likely to spend

Question 5

MPS

Answer 5

Marginal propensity to save

How much of an increase in income your lilely to spend

Question 6

MPC+MPS

Answer 6

1

Question 7

Wealth effect

Answer 7

As the value of assets increases so does consumption

Confidence increases

Question 8

Monitary wealth

Answer 8

Cash

Question 9

Physical wealth

Answer 9

Assets

Question 10

Confidence

Answer 10

Confidence increase consumption increase

Question 11

Interest rates

Answer 11

Interest rates, borrow less, less spending

Question 12

Inflation

Answer 12

As inflation increases consumption decreases

However can bring forward purchases if inflarion expected to rise

Question 13

Availability of credit

Answer 13

If you can borrow money you can buy more

Question 14

Expectations

Answer 14

If you expect prices to increase you will buy more and vice versa

Question 15

Composition of households

Answer 15

MPC in relation to households

Different composition of households different MPC

Question 16

Level of saving

Answer 16

Savings ratio- proportion of income which is saved

Factors that affect saving same as consumed

Question 17

Employment/unemployment

Answer 17

Yeah