ch17Household and Firm Behavior(宏观经济学Karl Case, Ray Fair)概要1.pptVIP

Household and Firm Behavior in the Macroeconomy:A Further Look Households: Consumption andLabor Supply Decisions Keynes suggested that consumption is a positive function of income, and that high-income households consume a smaller portion of their income than low-income households. The Keynesian Theory of Consumption: A Review The average propensity to consume (APC) is the proportion of income households spend on consumption. Determined by dividing consumption (C) by income (Y). The Life-Cycle Theory of Consumption The life-cycle theory of consumption is an extension of Keyness theory. It states that households make lifetime consumption decisions based on their expectations of lifetime income. The Life-Cycle Theory of Consumption The Life-Cycle Theory of Consumption Consumption decisions are likely to be based on permanent income rather than on current income. Permanent income is the average level of one’s expected future income stream. The Life-Cycle Theory of Consumption Policy changes, like tax-rate changes, are likely to have more of an effect on household behavior if they are expected to be permanent rather than temporary. The Labor Supply Decision Households make consumption and labor supply decisions simultaneously. Consumption cannot be considered separately from labor supply, because it is precisely by selling your labor that you earn income to pay for your consumption. The Labor Supply Decision Factors that determine the quantity of labor supplied include: The wage rate Prices Wealth and nonlabor income The Labor Supply Decision An increase in the wage rate causes the opportunity cost of leisure to rise, leading to a larger labor supply—a larger labor force. This is called the substitution effect of a wage rate increase. The Labor Supply Decision A higher wage means that people will spend some of it on leisure by working less. This is the income effect of a wage rate increase. Data suggests that the substitution effect prevails over the income effec