Question

In one to two sentences, explain how consumption is determined in a market economic system.

Answer 1

consumption = income - saving.

Step-by-step explanation:

In the market economy, the consumption is determined by subtracting the total savings from the total income. Moreover, consumption depends on income. If the income rises then consumption also rises or if the income falls then consumption also falls. Additionally, if a person has an income of $100 and he saves $75. Here the consumption will be $100 - $75 = $25.