What factors determine how consumers spend their income? Concept Introduction: Many factors affect how consumers spend their income; the first of them we can say is that the propensity to consume. Propensity to consume: The famous economist John Maynard Keynes introduced the propensity to consume, it is defined as the proportion of disposable income to the consumption or in another words how much of the income of people spend on consumption. Disposable income: This is the income of the people after taxation .

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Answer 1

Question

Chapter 10, Problem aWYWL

To determine

What factors determine how consumers spend their income?

Concept Introduction:

Many factors affect how consumers spend their income; the first of them we can say is that the propensity to consume.

Propensity to consume: The famous economist John Maynard Keynes introduced the propensity to consume, it is defined as the proportion of disposable income to the consumption or in another words how much of the income of people spend on consumption.

Disposable income: This is the income of the people after taxation.

Expert Solution & Answer

Explanation of Solution

The first factor that determines the consumption spending is the propensity to consume; as the income of the people rises the propensity to consume will also rise. Generally rich people tend to have a high propensity to consume and poor people have a low propensity to consume. The second factor that affects the consumption spending is the real income of the people; real income of the people is after deducting the inflation. So people have a higher real income to spend more of their income and vice versa. The next factor is the interest rate in the economy, if the interest rate is low that means the people have to less on their mortgage payments, so this will raise the disposable income of the people, raise in the disposable income of the people means higher consumption from the people.

The next factor is the direct and indirect taxation in the economy, the rate of taxation directly affects the disposable income of the people. A high tax rate means low disposable income to the people so they will consume less. Another factor is the supply of credit in the economy, if there is a low supply of credit in the economy, this means people have a relatively low disposable income so they consume less, and if there is more supply of credit in the economy they will borrow more funds and they should have a higher disposable income to spend. The next factor is the demographics of the country if there is a large number of people in a country, this means the more demand for goods and services so the demographics should have a direct effect on the consumption spending of the people.

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Students have asked these similar questions

Exercise 5Consider the demand and supply functions for the notebooks market.QD=10,000−100pQS=900pa. Make a table with the corresponding supply and demand schedule.b. Draw the corresponding graph.c. Is it possible to find the price and quantity of equilibrium with the graph method? d. Find the price and quantity of equilibrium by solving the system of equations.

1. Consider the market supply curve which passes through the intercept and from which the marketequilibrium data is known, this is, the price and quantity of equilibrium PE=50 and QE=2000.a. Considering those two points, find the equation of the supply. b. Draw a graph for this equation. 2. Considering the previous supply line, determine if the following demand function corresponds to themarket demand equilibrium stated above. QD=.3000-2p.

Supply and demand functions show different relationship between the price and quantities suppliedand demanded. Explain the reason for that relation and provide one reference with your answer.

Answer 2

Question

Chapter 10, Problem aWYWL

To determine

What factors determine how consumers spend their income?

Concept Introduction:

Many factors affect how consumers spend their income; the first of them we can say is that the propensity to consume.

Propensity to consume: The famous economist John Maynard Keynes introduced the propensity to consume, it is defined as the proportion of disposable income to the consumption or in another words how much of the income of people spend on consumption.

Disposable income: This is the income of the people after taxation.

Expert Solution & Answer

Explanation of Solution

The first factor that determines the consumption spending is the propensity to consume; as the income of the people rises the propensity to consume will also rise. Generally rich people tend to have a high propensity to consume and poor people have a low propensity to consume. The second factor that affects the consumption spending is the real income of the people; real income of the people is after deducting the inflation. So people have a higher real income to spend more of their income and vice versa. The next factor is the interest rate in the economy, if the interest rate is low that means the people have to less on their mortgage payments, so this will raise the disposable income of the people, raise in the disposable income of the people means higher consumption from the people.

The next factor is the direct and indirect taxation in the economy, the rate of taxation directly affects the disposable income of the people. A high tax rate means low disposable income to the people so they will consume less. Another factor is the supply of credit in the economy, if there is a low supply of credit in the economy, this means people have a relatively low disposable income so they consume less, and if there is more supply of credit in the economy they will borrow more funds and they should have a higher disposable income to spend. The next factor is the demographics of the country if there is a large number of people in a country, this means the more demand for goods and services so the demographics should have a direct effect on the consumption spending of the people.

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Answer 3

Question

Chapter 10, Problem aWYWL

To determine

What factors determine how consumers spend their income?

Concept Introduction:

Many factors affect how consumers spend their income; the first of them we can say is that the propensity to consume.

Propensity to consume: The famous economist John Maynard Keynes introduced the propensity to consume, it is defined as the proportion of disposable income to the consumption or in another words how much of the income of people spend on consumption.

Disposable income: This is the income of the people after taxation.

Expert Solution & Answer

Explanation of Solution

The first factor that determines the consumption spending is the propensity to consume; as the income of the people rises the propensity to consume will also rise. Generally rich people tend to have a high propensity to consume and poor people have a low propensity to consume. The second factor that affects the consumption spending is the real income of the people; real income of the people is after deducting the inflation. So people have a higher real income to spend more of their income and vice versa. The next factor is the interest rate in the economy, if the interest rate is low that means the people have to less on their mortgage payments, so this will raise the disposable income of the people, raise in the disposable income of the people means higher consumption from the people.

The next factor is the direct and indirect taxation in the economy, the rate of taxation directly affects the disposable income of the people. A high tax rate means low disposable income to the people so they will consume less. Another factor is the supply of credit in the economy, if there is a low supply of credit in the economy, this means people have a relatively low disposable income so they consume less, and if there is more supply of credit in the economy they will borrow more funds and they should have a higher disposable income to spend. The next factor is the demographics of the country if there is a large number of people in a country, this means the more demand for goods and services so the demographics should have a direct effect on the consumption spending of the people.

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Answer 4

Question

Chapter 10, Problem aWYWL

To determine

What factors determine how consumers spend their income?

Concept Introduction:

Many factors affect how consumers spend their income; the first of them we can say is that the propensity to consume.

Propensity to consume: The famous economist John Maynard Keynes introduced the propensity to consume, it is defined as the proportion of disposable income to the consumption or in another words how much of the income of people spend on consumption.

Disposable income: This is the income of the people after taxation.

Expert Solution & Answer

Explanation of Solution

The first factor that determines the consumption spending is the propensity to consume; as the income of the people rises the propensity to consume will also rise. Generally rich people tend to have a high propensity to consume and poor people have a low propensity to consume. The second factor that affects the consumption spending is the real income of the people; real income of the people is after deducting the inflation. So people have a higher real income to spend more of their income and vice versa. The next factor is the interest rate in the economy, if the interest rate is low that means the people have to less on their mortgage payments, so this will raise the disposable income of the people, raise in the disposable income of the people means higher consumption from the people.

The next factor is the direct and indirect taxation in the economy, the rate of taxation directly affects the disposable income of the people. A high tax rate means low disposable income to the people so they will consume less. Another factor is the supply of credit in the economy, if there is a low supply of credit in the economy, this means people have a relatively low disposable income so they consume less, and if there is more supply of credit in the economy they will borrow more funds and they should have a higher disposable income to spend. The next factor is the demographics of the country if there is a large number of people in a country, this means the more demand for goods and services so the demographics should have a direct effect on the consumption spending of the people.

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Answer 5

Chapter 10, Problem aWYWL

To determine

What factors determine how consumers spend their income?

Concept Introduction:

Many factors affect how consumers spend their income; the first of them we can say is that the propensity to consume.

Propensity to consume: The famous economist John Maynard Keynes introduced the propensity to consume, it is defined as the proportion of disposable income to the consumption or in another words how much of the income of people spend on consumption.

Disposable income: This is the income of the people after taxation.

Expert Solution & Answer

Explanation of Solution

The first factor that determines the consumption spending is the propensity to consume; as the income of the people rises the propensity to consume will also rise. Generally rich people tend to have a high propensity to consume and poor people have a low propensity to consume. The second factor that affects the consumption spending is the real income of the people; real income of the people is after deducting the inflation. So people have a higher real income to spend more of their income and vice versa. The next factor is the interest rate in the economy, if the interest rate is low that means the people have to less on their mortgage payments, so this will raise the disposable income of the people, raise in the disposable income of the people means higher consumption from the people.

The next factor is the direct and indirect taxation in the economy, the rate of taxation directly affects the disposable income of the people. A high tax rate means low disposable income to the people so they will consume less. Another factor is the supply of credit in the economy, if there is a low supply of credit in the economy, this means people have a relatively low disposable income so they consume less, and if there is more supply of credit in the economy they will borrow more funds and they should have a higher disposable income to spend. The next factor is the demographics of the country if there is a large number of people in a country, this means the more demand for goods and services so the demographics should have a direct effect on the consumption spending of the people.

Answer 6

Chapter 10, Problem aWYWL

To determine

What factors determine how consumers spend their income?

Concept Introduction:

Many factors affect how consumers spend their income; the first of them we can say is that the propensity to consume.

Propensity to consume: The famous economist John Maynard Keynes introduced the propensity to consume, it is defined as the proportion of disposable income to the consumption or in another words how much of the income of people spend on consumption.

Disposable income: This is the income of the people after taxation.

Expert Solution & Answer

Explanation of Solution

The first factor that determines the consumption spending is the propensity to consume; as the income of the people rises the propensity to consume will also rise. Generally rich people tend to have a high propensity to consume and poor people have a low propensity to consume. The second factor that affects the consumption spending is the real income of the people; real income of the people is after deducting the inflation. So people have a higher real income to spend more of their income and vice versa. The next factor is the interest rate in the economy, if the interest rate is low that means the people have to less on their mortgage payments, so this will raise the disposable income of the people, raise in the disposable income of the people means higher consumption from the people.

The next factor is the direct and indirect taxation in the economy, the rate of taxation directly affects the disposable income of the people. A high tax rate means low disposable income to the people so they will consume less. Another factor is the supply of credit in the economy, if there is a low supply of credit in the economy, this means people have a relatively low disposable income so they consume less, and if there is more supply of credit in the economy they will borrow more funds and they should have a higher disposable income to spend. The next factor is the demographics of the country if there is a large number of people in a country, this means the more demand for goods and services so the demographics should have a direct effect on the consumption spending of the people.

Answer 7

Chapter 10, Problem aWYWL

To determine

What factors determine how consumers spend their income?

Concept Introduction:

Many factors affect how consumers spend their income; the first of them we can say is that the propensity to consume.

Propensity to consume: The famous economist John Maynard Keynes introduced the propensity to consume, it is defined as the proportion of disposable income to the consumption or in another words how much of the income of people spend on consumption.

Disposable income: This is the income of the people after taxation.

Answer 8

Expert Solution & Answer

Explanation of Solution

The first factor that determines the consumption spending is the propensity to consume; as the income of the people rises the propensity to consume will also rise. Generally rich people tend to have a high propensity to consume and poor people have a low propensity to consume. The second factor that affects the consumption spending is the real income of the people; real income of the people is after deducting the inflation. So people have a higher real income to spend more of their income and vice versa. The next factor is the interest rate in the economy, if the interest rate is low that means the people have to less on their mortgage payments, so this will raise the disposable income of the people, raise in the disposable income of the people means higher consumption from the people.

The next factor is the direct and indirect taxation in the economy, the rate of taxation directly affects the disposable income of the people. A high tax rate means low disposable income to the people so they will consume less. Another factor is the supply of credit in the economy, if there is a low supply of credit in the economy, this means people have a relatively low disposable income so they consume less, and if there is more supply of credit in the economy they will borrow more funds and they should have a higher disposable income to spend. The next factor is the demographics of the country if there is a large number of people in a country, this means the more demand for goods and services so the demographics should have a direct effect on the consumption spending of the people.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 10 - Prob. aWYWL Ch. 10 - Prob. bWYWL Ch. 10 - Prob. cWYWL Ch. 10 - Prob. dWYWL Ch. 10 - Prob. eWYWL Ch. 10 - Prob. 1QFT Ch. 10 - Prob. 2QFT Ch. 10 - Prob. 3QFT Ch. 10 - Prob. 1P Ch. 10 - Prob. 2P

Explanation of Solution

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