You are what you consume

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You are what you consume

Besides telling us that consumption is an increasing function of income and it increases by less than the increment of income, this hypothesis helps in explaining 1 The theoretical possibility of general overproduction or " underemployment equilibrium " and also 2 The relative stability of a highly developed industrial economy.

For it implies that the gap between income and consumption at all high levels of income is too wide to be easily filled by investment with the possible consequences that the economy may fluctuate around underemployment equilibrium.

Thus the economic significance of the MPC lies in filling the gap between income and consumption through planned investment to maintain the desired level of income. When a person earns a higher income, the cost of their basic human needs amount to a smaller fraction of this income, and correspondingly their average propensity to save is higher than that of a person with a lower income.

The marginal propensity to save of the richer classes is greater than that of the poorer classes. If, at any time, it is desired to increase aggregate You are what you consume, then the purchasing power should be transferred from the richer classes with low propensity to consume to the poorer classes with a higher propensity to consume.

Likewise, if it is desired to reduce community consumption, the purchasing power must be taken away from the poorer classes by taxing consumption. The marginal propensity to consume is higher in a poor country and lower in the case of rich country.

You are what you consume

The reason is same as stated above. In the case of rich country, most common of the basic needs of the people have already been satisfied, and all the additional increments of income are saved, resulting in a higher marginal propensity to save but in a lower marginal propensity to consume.

In a poor country, on the other hand, most of the basic needs of the people remain unsatisfied so that additional increments of income go to increase consumption, resulting in a higher marginal propensity to consume and a lower marginal propensity to save.

The MPC of individuals[ edit ] Much of the current discussion seems to rely on the MPC being unique to a country, and homogeneous across such an economic entity; and the theory and the mathematical formulae apply to this use of the term. Even if it was, the nature of the consumption is not homogeneous.

Some consumption may be seen as more benevolent to the economy than others. Therefore, spending could be targeted where it would do most benefit, and thus generate the highest closest to 1 MPC.

This has traditionally been regarded as construction or other major projects which also bring a direct benefit in the form of the finished product.

Clearly, some sectors of society are likely to have a much higher MPC than others. Someone with above average wealth or income or both may have a very low short-term, at least MPC of nearly zero—saving most of any extra income.

But a pensioner, for example, will have an MPC of 1 or even greater than 1. This is because a pensioner is quite likely to spend every penny of any extra income.

This would occur where the extra income stream gives confidence that the individual does not need to put aside as much in the form of savings; or perhaps can even dip into existing savings. More importantly, this consumption is much more likely to occur in local small business—local shops, pubs and other leisure activities for example.

These types of businesses are themselves likely to have a high MPC, and again the nature of their consumption is likely to be in the same, or next tier of businesses, and also of a benevolent nature.

Other individuals with a high, and benevolent, MPC would include almost anyone on a low income—students, parents with young children, and the unemployed.You have probably noticed that almost all species of birds will stand on one leg, especially when they are resting.

Here's the reason: Bird's legs have a unique system of blood veins in their legs called “rete mirabile” (pronounced ree-tee mee-rah-bi-lay) that minimizes heat loss.

In economics, the marginal propensity to consume (MPC) is a metric that quantifies induced consumption, the concept that the increase in personal consumer spending (consumption) occurs with an increase in disposable income (income after taxes and transfers).

The proportion of disposable income which individuals spend on consumption is known as propensity to consume.

Liz, Yes, but if it’s a surge protector it will still consume around 6 watts itself. If it’s just a power strip, no surge protection, then it will consume 0 watts once you turn it off and nothing plugged into it can consume any power.

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Total muscle mass, strength and power can benefit athletes in many ways depending on their specific sport, position and needs. Therefore, it is important for athletes to determine what the optimal protein intake is in order to support these needs. Ever wonder how much energy you consume every year?

We're breaking down the numbers for you.

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