CHAPTER9:

EXPENDITURE, SAVING & INCOME

Expenditure
: an amount of money that is spent on something
: the act of spending money ( Merriam Webster Dict.)
:the total amount of money that a government,
organization, or person spends during a particular period of
time.(Longan Dictionary)

Saving
According to Keynesian economics, are what a person
has left over when the cost of his or her consumer
expenditure is subtracted from the amount of disposable
income earned in a given period of time. ( Investopedia. com)
Income
Is money that an individual or business
receives in exchange for providing a good or
service or through investing capital. Income is
used to fund day-to-day expenditures.
( Investopedia.com)
 PERSONAL INCOME
VS.
PERSONAL DISPOSABLE
INCOME
Personal Income - is the total income
received by the members of the domestic household sector,
which may or may not be earned from productive activities
during a given period of time, usually one year.

Personal Disposable Income - is the

total income that can be used by the household sector for
either consumption or saving during a given period of time,
usually one year.
Is after-tax income that is
officially calculated as the difference between personal
income and personal tax and nontax payments.
DISPOSITION OF HOUSEHOLD
INCOME
Two ways of using of Disposable Income

1.) Spend on consumption of goods

2) Not to spend it ( save)

 Income
CONSUMPTION Consumption
Food Investment
Clothing
Housing Chain
Personal Education
Medical care
Disposable Others
Income
Bank Deposits

Saving Income Earning Activity

Cash Hoarding
CONSUMPTION
PATTERN
IN ONE
COUNTRY
Meanwhile, key results of the 2015 FIES showed that
The average annual income of Filipino families was
approximately PhP267,000 while the average annual family
expenditure was about PhP215,000. Thus, on the average,
On thefamily’s
Filipino other hand,
savingsthe average
amounted annual family
to PhP52,000 in a year.
Among the regions, families in the National Capital
Region (NCR) posted the highest average annual family
income at PhP425,000.

On the other hand, the average annual family income in

Region XI (Davao Region) increased by PhP53,000 from 2012 to
2015, which is the biggest increase among all regions in 2015.
 Across all income groups, food expenses
accounted 41.9 percent of the total annual
family expenditures.
INCOME ELASTICITY OF
EXPENDITURE IS DEFINED AS THE PROPORTIONAL
CHANGE IN EXPENDITURE RESULTING FROM A GIVEN
PERCENTAGE CHANGE IN INCOME

Income Elasticity of a given Expenditure =

𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐸𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒
𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐼𝑛𝑐𝑜𝑚𝑒

The value of the Expenditure Elasticity is that it

enables us to know the response of the consumption
of an item to a percent increase in the income of the
household.
MARGINAL EXPENDITURE PROPENSITY
FOR A GOOD

Marginal Propensity of Expenditure

(mpe) is defined as the change in
expenditure for an item resulting
from a given unit of increase of
income.
WHAT DETERMINES THE
COMPOSITION OF
CONSUMPTION?

Price
Income
Size of Family
Age level ''life cycle''
Income distribution
Other noneconomic factors
 PROPENSITY TO CONSUME
&
PROPENSITY TO SAVE

Marginal Propensity to Consume (mpc)

defined as the increase in consumption
arising from a unit increase in Income.

Marginal Propensity to Save (mps)

is the increase in saving derived from a unit
increase in income.