If you made $1000 a month how much would you spend? What if you made $2000 a month, how much would you spend?
Put this on a graph with how much you consume on the vertical or Y-axis and your income on the horizontal or X-axis. What is the slope of that line?
- Slope = the change in y/change in X
- or the change in your consumption (C)/the change in your income (Y-T)
This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.There are many factors that determine my spending patterns. These have been listed below.
• My income levels: If I am able to earn a lot, I spend also more, compared to when I earn less. I always want to save my money and that makes me a miser when it comes to spending. I spend only on needed items when my income is low and when my salary is high, I spend on discretionary items also such as travel, outside restaurant, etc.
• The interest earned on savings: When the interest that can be earned by investing the money is high, my marginal propensity to save is also high and I tend to spend less. This is because I want to save as much money feasible so that I can invest the money in higher interest rates and earn higher investment income. When the interest rates are low, I tend to spend more as the marginal propensity to save is less...