What Is Relationship Between Consumption, Income And Saving?


4 Answers

Anonymous Profile
Anonymous answered
Please I would like to find an answer to a question which is : What is the effects of the incomes of individuals over the economy of a country?? Thank you
Tariq Habib Profile
Tariq Habib answered
Income, consumption and saving are all closely linked. More precisely personal saving is that part of disposable income that is not consumed, saving equals income minus consumption. Begin with personal income. In 1996, some $864 billion of personal income or 13.4 percent went to personal tax and no tax payments. This left $5586 billion of personal disposable income. Household outlay of consumption amounted to 95 percent of disposable income, or $5314 billion, leaving $272 billion as personal saving.

Economic studies have shown that income is the primary determinant of consumption and saving. Rich people save more than poor people, both absolutely and as a percent of income. The very poor are unable to save at all. Instead, as long as they can borrow or draw down their wealth, they tend to save. That is they tend to spend more than they earn reducing they're accumulated saving or going deeper into debt. So we can say that there is a deep relationship between consumption, income and saving and they all affects to each other. I think this answer will satisfy your question.

Answer Question