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Personal Disposable Income refers to the income that is available to the households that they can spent as they wish.
All the Personal Income is not available to individuals to spend. They have to pay taxes (e.g. – Income tax) and non-tax payment such as fines.
The formula for Personal Disposable Income is
Personal Disposable Income (PDI) ≡ PI – Personal tax payments – Non-tax payments (such as fines etc)
Thus, Personal Disposable Income is the part of aggregate income which belong to the households. They may decide to consume a part of it, and save the rest.
