Macroeconomics : Level of Income, Consumption, Saving

We know that economic recycle of duo sector is consists "firms" & "households".

Firms

• Responsible to provide goods (product & services) to households

• Receive production factor for output production from households

       Households

• Provide firms the factor of production
• Receive income from firms for the factor that provide to firms
• Income of households contribute to "consumption" and "saving". 

Formula that usually use to explain level of consumption and saving: 

(The Average Propensity To Consume : APC) 

• The ratio between level of households consumption (c) and level of income (y). 
• Formula:    

                                          C

                                          Y

• It shows more higher level of income is more smaller of APC value.

(The Average Propensity To save: APS)

• The ratio between level of households saving (s) and level of income (y). 
• Formula: 

                                             S

                                             Y

• It shows more higher level of income is more smaller of APS value. 

(Marginal Propensity To Consume: MPC) 

• The ratio between ∆ in level of households consumption (c) cause the ∆ in level of income. 
• Formula: 

                                              ∆C

                                              ∆Y

• It shows if the income increase 1%, so how much percentage the ∆ in level of households consumption. 

(Marginal Propensity To Save: MPS) 

• The ratio between ∆ in level of households saving (s) cause the ∆ in level of income. 
• Formula: 

                                              ∆S

                                              ∆Y

• It shows if the income increase 1%, so how much percentage the ∆ in level of households saving. 
• Value of MPC and MPS, must between 0 and 1. 
• if value of MPC + MPS must equal to 1. 

Economic View: Human, Earth, Scarcity, Insatiable.

Actually what economic is? Let us start from the heart of economic .

"The universal belief among economists that human beings have insatiable or infinite wants, are never satisfied with what they have and always want more. This belief is not based on scientific evidence or testing. But economists assert it as true. They are unlikely, though, to be the only ones holding it. Many parents probably share this view of human nature after spending so much time explaining to their children why they cannot have all they want.

Insatiable wants need not, however imply selfishness. We might want more for others and never be satisfied with what they have had given to them, which is a much more positive view of human beings. But, whatever our wants, whether for ourselves or others, experience suggests that believing we are insatible is reasonable.

Despite granting that people might consider others, economists usually do think (although not always) that people wants things for themselves. Economists accept that people can be concerned for others and most economists, if not all, would argue that they care for their fellow human beings. The difficulty is that economists have found they can better predicts people's action by assuming they are self-absorbed. 

Humanity's Insatiable wants seem an odd starting point in a book about economics but they are central to the subject because of a harsh reality. The earth lacks the resources to satisfy these wants. The earth's resources are, in in the term used by economists, scarce. Although a few might be in enough supply to satisfy all wants, such as the air we breathe, they are the exception of 'free goods' which prove the rule that most resources are scarce.   

-By Thomas Coskaren (Durham Business School).