The economic relationships between consumption, income and investment?

Slice'N'Dice

2

Any ideas what to write about anyone?

Thanks.

Reply 1

asadtamimi

13

Its related to Aggregate demand - increase in consumption and investment leads to an increase in Aggregate demand.

Increase in income leads to an increase in microeconomic demand - all these small increases in demand lead to an increase in aggregate demand - also higher income generally means people consume and invest more.

One thing about investment is that it can also increase aggregate supply as increasing the capital stock makes the productive capacity of an economy larger.

I hope this has helped you

Regards, Asad

Reply 2

asadtamimi

13

Oh sorry i just found out your the founder of the economics society so your bound to know those basics :P

Im not sure what more advanced things you can say

Reply 3

Slice'N'Dice

OP

2

asadtamimi

Its related to Aggregate demand - increase in consumption and investment leads to an increase in Aggregate demand.

Increase in income leads to an increase in microeconomic demand - all these small increases in demand lead to an increase in aggregate demand - also higher income generally means people consume and invest more.

One thing about investment is that it can also increase aggregate supply as increasing the capital stock makes the productive capacity of an economy larger.

I hope this has helped you

Regards, Asad

Hey, thanks for your help.

That's the thing..I know the basics, but I can't seem to think of anything more advanced to say. Ahh, I suppose I'll be inspired by something soon! :cool:

Reply 4

Kendra

2

C = F(Y)
Consumption is a function of income i.e.
C = a + bY
(a = autonomous expenditure, B = marginal propensity to consume)
In the long run
C = a + Y
(You'd expect homogeneity between consumption and income, i.e. in the long run all extra income is consumed).

I = F(Y,r)
Positively on Y, negatively on r, but strong emphasis on the real interest rate.

Reply 5

RAYPLETTS

Yes. Look at 45 degree angle.
Look at internal rate of return
Look at Consumption age theory
Look at DCF

Enjoy... you can really take this topic to a high level.

Reply 6

RAYPLETTS

If you have any question, ask

Reply 7

RAYPLETTS

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The economic relationships between consumption, income and investment?

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