Question

5. Estimate your income, consumption, and saving for last year. If you dissaved (consumed more than your income), how did you fi nance your dissaving? Estimate
the composition of your consumption in terms of each of the major categories listed in Table 21-1.

Answer 1

The income earned by the people is either consumed or saved. As the income increases consumption increases but an increase in income is more than the increase in consumption. Similarly, as income increases, there is also an increase in savings.

The income for the last year was $2500, and the consumption was $2800 which led to dis-savings of -$300. The dis-savings were financed from some savings from before and loan taken from family and friends.

The breakup of the consumption is given below-

The major expenditure is done on non-durable goods that are the necessary goods such as food and clothing. Similarly, more expenditure is done on services such as housing, household operations, and transportation.