Consumption

Question 1

Marginal Propensity to Consume (MPC)

Marginal Propensity to Save (MPS)

Average Propensity to Consume (APC)

Average Propensity to Save (APS)

Answer 1

MPC = (Change in Consumption)/(Change in Income)

MPS = (Change in Savings) / (Change in Income)

MPC + MPS = 1

APC = Consumption/Income

APS = Savings / Income

Question 2

Determinants of Consumption

Answer 2

Disposable Income
Interest Rates
Consumer Confidence
Wealth Effects - The change in consumption following a change in wealth
The Availability of Credit
Inflation
The Composition of Households

Question 3

Durable Goods

Answer 3

Goods which are consumed over a long period of time, such as televisions or cars.

Question 4

Non-Durable Goods

Answer 4

Goods which are consumed almost immediately like an ice cream or a packet of washing powder.