How to calculate consumption expenditure?
Understand the Problem
The question is asking how to determine or calculate the total amount spent on consumption, which typically includes all expenditures on goods and services by households.
Answer
C = A + MD
C = A + MD, where C is the consumer expenditure, A is autonomous consumption, M is the marginal propensity to consume, and D is the disposable income.
Answer for screen readers
C = A + MD, where C is the consumer expenditure, A is autonomous consumption, M is the marginal propensity to consume, and D is the disposable income.
More Information
In economics, this formula helps to understand how overall consumer spending is influenced by base-level spending and changes in disposable income.
Tips
A common mistake is confusing the variables or forgetting to multiply the marginal propensity to consume (M) by the disposable income (D). Ensure all components are correctly identified and used in the calculation.
Sources
- Consumption function definition and formula - investopedia.com
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