EC1002 Chapter 10 Lesson 1 - Consumption Functions [Full]

Welcome to the Real Quickienomics. You are watching the full version of EC1002 Introduction to Economics Chapter 10 Lesson 1 - Consumption Functions.

Key Topics:
- Understand the 2 major components of consumption: Income Dependent/Induced and Independent/Autonomous consumption
- Tell the difference between lump sum and proportional taxes
- Introduction to Econometrics (Non-examinable, but extremely useful)
- Construct the consumption function which includes taxes, disposable income and marginal propensities to consume
- Define spending habits between the rich and poor
- Handle government imposed transfers

[travelmemoir]

At 18:19 when you derive the consumption equation for prop. Tax and prop. transfer, why in this scenario are you using (1-b). I tried to derive the first equation on my own before you proceeded and had come up with
C= c + Cr[ày - t - (1-b)(ày)] + Cp [(1-à)y - t + (1-b)(ày)]

[travelmemoir]

okay I think I may I have got it
C = c + Cr[(1-t)a.y—b.(1—t).a.y]
rich induced = Cr[a.y.(1—t)(1—b)]

Is this approach right?