1. Limited time only! Sign up for a free 30min personal tutor trial with Chegg Tutors
    Dismiss Notice
Dismiss Notice
Join Physics Forums Today!
The friendliest, high quality science and math community on the planet! Everyone who loves science is here!

Homework Help: Personal Wealth Model

  1. May 19, 2008 #1
    Most people have an income that comes from 2 sources: salary and personal investements. From thies income, 'necessary' expenses (housing, food) are paid; some money is spent on 'luxuries' and the rest is saved (increasing investments).

    Given that income must equal outflow, show the steps in developing the following mathematics model for a person's wealth at any time t:

    dW/dt = (1-p)(s-n+rW)

    Where s = your salary
    W(t) = your wealth (savings), which is a function of time
    r = rate of interest on your wealth (savings)
    n = amount spent on necesseties
    p = proportion of your income after necesseties that you spend on luxuries

    My question is how do I get this model... I have no idea and it is starting to irritate me as this is due in a couple of days.
  2. jcsd
  3. May 19, 2008 #2


    User Avatar
    Homework Helper

    You have to group the expenditures together, and the money inflow together. Note that p is something you factor in only when everything else has been included, judging by the description of p.

    Expenditures: n(this is a fixed value, not proportion of income or anything else), (1-p)*X(proportion of income after deducting amount spent on necessities and X refers to everything else after you've included all factors)

    Inflow: s(salary), rW(this is interest rate on your savings).

    dW/dt = Inflow - expenditures
  4. May 19, 2008 #3
    ok i understand that to some extent.

    so dW/dt= inflow - expenditures
    = s + rW - n

    Then I am guessing as it is a model to show someones wealth at any time t, we must multiply this by (1-p) as this represents the money we save.

    Does this make sense or am I on the wrong track?
  5. May 19, 2008 #4


    User Avatar
    Homework Helper

    Yes that is so.
  6. May 19, 2008 #5
    ok thank you
Share this great discussion with others via Reddit, Google+, Twitter, or Facebook