Question

4) An article in Dagens Næringsliv («Danske Bank: Everything is in place for a consumer party», DN 2. September, 2020) states that: «Norwegians' savings during the corona crisis have been record high. Danske Bank believes that everything is now in place for a consumer party when the infection control measures cease. ». Discuss with the help of figures whether Danske Bank's claim about a future consumer party can supported by microeconomic theory of saving and consumption in a situation with epidemic measures (infection control measures).

Answer 1

Sol: Saving and consumption are the part of "Macro Economics" theory bu sometimes like during the short run also applicable to "Micro Economics" theory. As part of aggregate demand also starts from individual demand.

• Duing the corona virus limiting the part of income of consumer up to only necessary goods and reducing the exoanses on party and other luxurious goods increases the real income of the consumer as consumption reduced that lead to rise in savings of the consumer.
• When Income is equal to Consumption lead to break even point as Saving is zero. here Consumption reduced and real income rises . so lead to rise in Savings.

Going through the long run we can use the graph of AD and AS to come to conslusion and showing the above condition.

During short run can use graph of Indifference curve analysis that show the consumption level of consumer within the budget constraint.