Chapter 16 Consumption Glossary Marginal propensity to consume (MPC) The increase in consumption resulting from a one-dollar increase in disposable income. Average propensity to consume(APC) The ratio of consumption to income (C/Y)
Glossary ⚫ Marginal propensity to consume (MPC) The increase in consumption resulting from a one-dollar increase in disposable income. ⚫ Average propensity to consume (APC) The ratio of consumption to income (C/Y). Chapter 16 Consumption
Intertemporal budget constraint The budget constraint applying to expenditure and income in more than one period of time. ●Discounting(贴现) The reduction in value of future expenditure and receipts, compared to current expenditure and receipts(收入)，resulting from the presence()of a positive interest rate
⚫ Intertemporal budget constraint The budget constraint applying to expenditure and income in more than one period of time. ⚫ Discounting(贴现) The reduction in value of future expenditure and receipts, compared to current expenditure and receipts(收入), resulting from the presence(存在) of a positive interest rate
●Indifference curves A graphical representation of preferences that shows different combinations of goods producing(产生，引起)the same level of satisfaction. Marginal rate of substitution (MRS) The rate at which a consumer is willing to give up some of one good in exchange for more of another;the slope of the indifference curve
⚫ Indifference curves A graphical representation of preferences that shows different combinations of goods producing(产生,引起)the same level of satisfaction. ⚫ Marginal rate of substitution (MRS) The rate at which a consumer is willing to give up some of one good in exchange for more of another; the slope of the indifference curve
●Normal good A good that a consumer demands in greater quantity when his or her income rises. ●Income effect The change in consumption of a good resulting from a movement to a higher or lower indifference curve,holding the relative price constant
⚫ Normal good A good that a consumer demands in greater quantity when his or her income rises. ⚫ Income effect The change in consumption of a good resulting from a movement to a higher or lower indifference curve, holding the relative price constant
●Substitution effect The change in consumption of a good resulting from a movement along an indifference curve because of a change in the relative price. Borrowing constraint A restriction on the amount a person can borrow from financial institutions,limiting that person's ability to spend his/her future income today;also called a liquidity constraint
⚫ Substitution effect The change in consumption of a good resulting from a movement along an indifference curve because of a change in the re1ative price. ⚫ Borrowing constraint A restriction on the amount a person can borrow from financial institutions, limiting that person's ability to spend his/her future income today; also called a liquidity constraint