Answer to Question #249222 in Macroeconomics for Biba

Question

1. Summarize the budget patterns for food, clothing, luxuries and saving.

Answer 1

Solution:

A budget is a monetary representation of one's expenses and income. The budget pattern of the various products reflects the income and consumption pattern of various commodities. Of course, many changes in economic factors occurred as a result of the developments that occurred in the surrounding community. When the amount of money received increases, so will the amount of money spend. The same is true for food and clothing. The greater the income received, the greater the purchasing power of ordinary goods, expensive foods, decent clothing, and the luxury that a person wears.

As one's income rises, so do one's purchasing power for inferior goods, such as clothing. With an increase in income, the amount of taxes levied will rise as well. If a person earns additional income after taxes, a portion of that income will be set aside for savings.

 

The budget pattern is described by Engel's law as follows: a. As income rises, the presentation of expenditures for food consumption shrinks. b. The percentage of spending on clothing is relatively constant and does not vary with income level. c. The percentage of consumption expenditure for home expenses is relatively constant and does not vary with income level. d. As income rises, so does the proportion of money spent on education, health, recreation, luxury items, and savings.