CONSUMPTION - -1- THE CONSUMPTION SECTOR The average...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
- 1 - THE CONSUMPTION SECTOR The average American spends about 95% of our income after tax. The total of everyone’s expenditures is consumption, designated by the letter "C". C is the largest sector of GDP and is now just over 2/3 of GDP. Throughout the 1980s, C averaged 65%. Today, it is roughly 68%. Consumers spend more than 50% of their income on services, e.g. medical care, eating out, video rentals. Life insurance and legal services (fees). The rest is spent on durable goods, e.g. TV and furniture or on non-durable goods, e.g. food and gasoline. COMPONENTS OF CONSUMPTION Services 50% Largest Durable 25% Good that last more than 1 yr. Non-durable 25% Good that last less than 1 yr. Even though consumption is not a steady component of disposable income, it is always almost between 90-95% of disposable income. Consumption is a function of D.I C = f (D.I) Disposable Income C = f (y) THE CONSUMPTION FUNCTION John M. Keynes - He believed that consumption is steady component of income. When
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/28/2011 for the course ECON 1 taught by Professor Sm during the Spring '10 term at Laney College.

Page1 / 4

CONSUMPTION - -1- THE CONSUMPTION SECTOR The average...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online