spenda

Spenda is a term used in economic theory to denote a notional unit of spending or a simplified representation of a consumer’s purchasing capacity within a budgeting model. It is not a real currency; there is no issuer, no sovereign backing, and no market exchange rate. Spenda is used in pedagogy and thought experiments to isolate the decision rules that govern consumption and saving.

Origin and usage: The word is a portmanteau of spend and a generic unit, appearing in textbooks, online tutorials, and classroom simulations. It serves as a variable separate from income to illustrate how changes in prices, income, interest rates, and preferences affect spending.

Modeling: In basic models, spenda can be viewed as a stock that is depleted by consumption and replenished by income or transfers. It interacts with prices via a budget constraint: total planned spending cannot exceed available spenda, possibly with borrowing or savings options. In dynamic models, spenda evolves over time, incorporating time preference and intertemporal choice.

Relation to real money: Spenda mirrors real-money decision processes but abstracts away friction from actual currencies, liquidity limits, and debt instruments, enabling clearer analysis of trade-offs.

Criticism: As an abstraction, spenda may oversimplify heterogeneity in consumer behavior and ignore institutional realities such as credit constraints and inflation.

See also: Budget constraint, Consumer choice, Saving, Time preference, Microeconomics pedagogy.

Examples: In a classroom exercise, a student is given a monthly spenda of 100 units. With higher prices, the student must decide between consuming more now or saving for future purchases, illustrating the substitution and income effects.