Consumption and Saving

-Disposable Income:

Income after taxes or net income
DI = Gross Income - Taxes
2 choices
* with disposable income, household
- consume (spend money on goods, and services )
- save (not spend money on goods & services)

- Consumption
Household spending
the ability to consume is constrained by the amount of disposable income
the propensity to save
* Do households consume if DI = O
- Autonomous consumption
-Dis-saving
APC = C/ DI = DI that is Spent saving
house hold NOT spending
the ability to save is constrained by the amount of disposable income
the propensity to consume
Do house holds save if DI + O- NO

APS = S/DI=%DI that is not spent
APC and APS
APC+APS=1
1-APC = APS
1-APS =APC
APC > 1.: dis-saving
-APS.: Dis-saving
MPS and MPC

*Marginal Propensity to consume 
- change in C/ change in DI
-% of every extra dollar earned that is spend
* Marginal Propensity to save
- change in S/ change in DI
-% of every extra dollar earned that is save
- MPC + MPS = 1
-1-MPC=MPS
-1-MPS=MPC