anyone studying ECONOMICS????!?

[ill-matic]

specifically Macroeconomic principles? If so, i need your help to relieve my confusion.


If you are familiar with the consumption function:

C = Co + b.Y (Consumption = Exogenous Consumption plus the Marginal Propensity to Consume multiplied by income)

- Exogenous consumption = consumption not determined by level of income

- MPC, or Marginal Propensity to Consume = For each additional dollar of income, what proportion is used for consumption. Represented by the coefficient b.


What i DONT understand is:

In my textbook it states that the magnitudes of both Co and b are determined by non-income determinants of consumption. I understand why Co is because it is exogenous, but how is the coefficient, b, determined by non-income determinants when by definition it is the proportion of any increase in income used for consumption? By definition it shows that it is directly influenced by the level of income, so how on earth can its "magnitude be determined by non-income determinants"??



Thankyou very much for anyone who helps me.

 

[Sebastian]

im not sure but maybe Illuminattile

 

[Tru Principle]

I know of member who is an Economics major, hopefully this member will read your thread and reply. GOOD LUCK.

 

[Taliq]

I don;t do Ecnomics but from what I know...

MPC = dC/dY right? where d = change, C = consumption (consumer spending) and Y = dispoable income.

Y can be determined by non-income (not related to the actual amount you have coming in) influences such as interest rates, consumer surplus and maybe inflation and taxes.

Like I said I don't study Economics but hope that helps.

 

[roaches]

ut how is the coefficient, b, determined by non-income determinants when by definition it is the proportion of any increase in income used for consumption? By definition it shows that it is directly influenced by the level of income, so how on earth can its "magnitude be determined by non-income determinants"??

That's right - it's magnitude. The amount of consumption changes with an increase in income (b*Y), but according to the model, not the PROPORTION of consumption (b).

Y does not change the value of b.

If you want a real-world example of this, look at America, where the propensity to consume is currently greater than income.

*Goes back to reviewing human capital theory*

 

[SicC]

no.

pz

 

[ill-matic]

thankyou very much taliq and roaches. much appreciated

ill knit u both some mittens

 

[Illuminattile]

im not sure but maybe Illuminattile

Economics is the reason I switched from a business course to a marketing course. It's so dull, and I'm sure it's something computers could be programmed to handle.

 

[The.Menace]

anyone studying ECONOMICS????!?

thx God I'm not.

 

[_carmi]

i was last semester. but almost failed.. sorry.

 

[Missy "C"]

That's right - it's magnitude. The amount of consumption changes with an increase in income (b*Y), but according to the model, not the PROPORTION of consumption (b).

I'm studying Economics, I have a test about all that next week, so I'm tired of reading about all this stuff! Roaches is right, the proportion of consuption is not determined by the income; b is always given. The magnitude of consumption is what changes if income varies.


Edit: anyways, that's only the classic theory, modern thoeries explain consumption differently.

 

[THA_DAN]

no.

pz

lmao

here we go again