|
|
LAW OF SUPPLY: The direct relationship between supply price and the quantity supplied, ceteris paribus. This fundamental economic principle indicates that as the price of a commodity increases, then the quantity of the commodity that sellers are able and willing to sell in a given period of time, if other factors are held constant, also increases. This law, while not quite as iron-clad as the law of demand, is quite important to the study of markets.
Visit the GLOSS*arama
|
|
|
|
                           SLOPE, CONSUMPTION LINE: The positive slope of the consumption line is also termed the marginal propensity to consume (MPC). This slope is greater than zero but less than one, reflecting induced consumption and the Keynesian psychological law of consumer behavior that consumption increases by less than the increase in income. The slope of the consumption line provides the foundation for the slope of the aggregate expenditures line and thus also affects the magnitude of the multiplier process. | Consumption Line | 
|
The consumption line, also termed propensity-to-consume line or consumption function, shows the relation between consumption expenditures and income for the household sector. The income measure commonly used is national income or disposable income. Occasionally a measure of aggregate production, such as gross domestic product, is used instead.A representative consumption line is presented in the exhibit to the right. This red line, labeled C in the exhibit, is positively sloped, indicating that greater levels of income generate greater consumption expenditures by the household sector. This positive relation corresponds to the fundamental psychological law of Keynesian economics. The consumption line graphically illustrates the consumption-income relation for the household sector, which is the foundation of the aggregate expenditures line used in Keynesian economics to identify equilibrium income and production. For reference, a black 45-degree line is also presented in this exhibit. Because this line has a slope of one, it indicates the relative slope of the consumption line. The slope of the consumption line presented here is positive, but less than one. In fact, the slope of the consumption line is numerically equal to the marginal propensity to consume. In this case the slope is equal to 0.75. The positive slope reflects induced consumption expenditures--more income means more consumption. It also reflects the basic Keynesian psychological law. Click the [Slope] button to illustrate. To illustrate the equality between slope and the marginal propensity to consume, consider the equations for each. The slope of the consumption line is specified as the "rise" over the "run." The rise is the change in consumption measured on the vertical axis and the run is the change in income measured on the horizontal axis. | slope | = | rise
run | = | change in consumption
change in income |
The marginal propensity to consume (MPC) is the incremental change in consumption resulting from an incremental change in income. | MPC | = | change in consumption
change in income |
The slope of the consumption line is the marginal propensity to consume, they are one and the same.The positive slope of the consumption line reflects induced consumption, which is consumption that depends on the level of household sector income. If the household sector receives more income, then it is induced to undertake additional consumption expenditures. Of course, a drop in income induces the household sector to reduce expenditures.
Recommended Citation:SLOPE, CONSUMPTION LINE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: July 2, 2025].
Check Out These Related Terms... | | | | | | | | | | | | | | |
Or For A Little Background... | | | | | | | | | |
And For Further Study... | | | | | | | | | | | | | | |
Search Again?
Back to the WEB*pedia
|
|
|
RED AGGRESSERINE
[What's This?]
Today, you are likely to spend a great deal of time driving to a factory outlet hoping to buy either a pair of handcrafted oven mitts or a coffee table shaped like the state of Florida. Be on the lookout for crowded shopping malls.
Your Complete Scope
This isn't me! What am I?
|
|
|
Helping spur the U.S. industrial revolution, Thomas Edison patented nearly 1300 inventions, 300 of which came out of his Menlo Park "invention factory" during a four-year period.
|
|
|
"always remember an epitaph which is in the cemetery at Tombstone, Arizona. It says: „Here lies Jack Williams. He done his damnedest.¾ I think that is the greatest epitaph a man can have ‚ When he gives everything that is in him to do the job he has before him. That is all you can ask of him and that is what I have tried to do. " -- Harry Truman, 33rd US president
|
|
HSB
High School and Beyond
|
|
|
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.
User Feedback
|
|
