Household final consumption is assumed to be represented by the following function: C = 120 + 0.9Y
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Question:
Household final consumption is assumed to be represented by the following function:
C = 120 + 0.9Y
Questions:
1. What do C and Y represent?
2. What do the numbers 120 and 0.9 correspond to?
3. Calculate the impact on consumption of a 55 increase in disposable income.
4. Deduce the average propensity to consume for Y = 1400 then Y = 2000.
What do you notice?
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