ECONOMICS
CONSUMERS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Lower tax on superannuation
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Expectations of a lower income in the future
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Cheaper access to credit
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Expectations of an overseas holiday in the future
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Detailed explanation-1: -The ratio of total consumption to total income is known as the average propensity to consume; an increase in consumption caused by an addition to income divided by that increase in income is known as the marginal propensity to consume.
Detailed explanation-2: -The average propensity to consume is the percentage of income spent, while the average propensity to save is the percentage of income saved. Higher average propensity to consume signals greater economic activity as consumers are demanding goods and services.
Detailed explanation-3: -The economic factors that most affect the demand for consumer goods are employment, wages, prices/inflation, interest rates, and consumer confidence.
Detailed explanation-4: -Since consumption plus saving is equal to disposable income, the increase in disposable income not consumed is saved. More generally, this link between consumption and saving (S) means that our model of consumption implies a model of saving as well. we can solve for S: S = Y d − C = −a + (1 − b)Y d.