Th2.2: Disposable Income

Question 1

Define disposable income

Answer 1

the money consumers have left to spend, after taxes have been taken away and benefits added

Question 2

What is it the most important factor of determining and why?

Answer 2

consumption - those who are earning a large income will be able to spend much more than those on a minimum wage

Question 3

For most people, what will their MPC be?

Answer 3

less than one but positive

Question 4

Why do some people have an MPC above 1?

Answer 4

they use borrow or savings to fulfil the demand for goods which is higher than their increase in income

Question 5

Who is more likely to have a higher MPC?

Answer 5

poor people - more likely to spend it

Question 6

What is the APC?

Answer 6

the average amount spent on consumption out of total income

Question 7

What does APC stand for?

Answer 7

average propensity to consume

Question 8

What is the APC like in an industrialised economy and why?

Answer 8

less than one because people save some of their earnings

Question 9

Formula for MPC

Answer 9

change in income

Question 10

Formula for APC

Answer 10

total income