Business, 27.07.2019 15:00 badgirl2005

If your income is $35,000 and the average propensity to save is 0.46, what is consumption?

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Disposable income = consumption + savings
$35,000 = consumption + $16,100 (which is .46% of the income for savings)
then we need to subtract $16,100 from both sides which leaves us with
$35,000 - $16,100 = $18,900
Consumption = $18,900

Answer from: goldenhawk239

The consumption is $18,900 when the income is $35,000, and the average propensity to save is 0.46.

Further Explanation:

The average propensity to save:

Average propensity to save refers to a ratio that shows how much amount of money a person saves from his income. As the average propensity to save is more, the average tendency to consume isless. There is an indirect relationship between the average propensity to save with the average propensity to consume. As the person spends more, the savings will be less.

Consumption:

Consumptionrefers to the amount of income spends for a particular period of time. The consumption amount can be computed by subtracting savings from the income amount. The consumption can also be computed by different methods in which the amount of income multiplied by the average propensity to consumption.

Compute the consumption:

Consumption= Total income × Average propensity to consume

= $35,000 × 0.54

= $18,900

Working note 1:

Compute the average propensity to consume:

Average propensity to consume = 1- average propensity to consume

= 1 – 0.46

= 0.54

Learn more:

1.Learn more about net income

2.Learn more about consumer influence

3.Learn more about the savings account

Answer details:

Grade: Middle School

Subject: Economics

Chapter: Saving and consumption

Keywords:income, $35,000, average propensity to save, average propensity to consume, consumption, saves, indirect relationship, average propensity to save.

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