a) Draw a consumption function and label the axes. b) Suppose that your friend has a consumption function of the form y=1.4x+200. Is this function sustainable in the long run? Why or why not? c) Suppose that your consumption function is y=0.75+1000. What is your marginal propensity to consume? What is your autonomous expenditure? d) State the permanent income hypothesis. e) Suppose that I raise your income today by $10, and lower it tomorrow by $10. How would your behavior change according to the consumption function (aka Keynesian, aka rule-of-thumb) model? And what about according to the permanent income hypothesis model?

Can you completely this question?

Assume you define your permanent income as the average of your income from this and the past four years. Your earnings record over these five years has been: Yt = 40,000, Yt-1 = 38,000, Yt-2 = 34,000, Yt-3 = 32,000, Yt-4 = 31,000. If your income increases next year to Yt+1 = 46,000, by how much will your consumption change if you always consume 90 percent of your permanent income?

Equation for consumption is C=40/(0.8Y) where Y= yearly income = $400.  A) what is the level of consumption B) what is the average propensity to consume

Economics Consider Esther's intertemporal choice of consumption (c1, c2), where c1 and c2 are the consumption level in periods 1 (horizontal axis variable) and 2 (vertical axis variable), respectively. Esther's preferences exhibit diminishing marginal returns to consumption. Which of the following statements is correct? Select one: Esther's marginal rate of substitution is decreasing in c2. а. b. None of the listed answers is correct. с. Esther's indifference curves are concave. d. Esther is indifferent between all bundles of (c1,c2) as long as their sum c1 + c2 is the same. е. Esther prefers similar amounts of c1 and c2 compared to the extreme cases of consuming all of her income as c1 or c2.

Suppose a change in income of $5,100 causes a change in consumption of $2,600. What is the MPS?   Multiple Choice   0.51   0.49   0.31   0.69

Course: Introduction to Microeconomics Topic: Intertemporal Consumption DecisionsA consumer makes decision to consume in this year and next year. This year she has an income of M1 = $ 1.5 million and next year her income will be M2 = $ 2.75 million. Interest rate is 10%. Her intertemporal preferences are represented by function U(c1, c2) = c1*c2, whose intertemporal marginal rate of substitution is IMRS = c2/c1.a) Find and graph Budget Constraintb) Find and graph  optimal consumption basket and indicate whether the consumer SAVES or BORROWS in the FIRST YEAR.c) Indicate whether following statement is true or false: "Any increase in interest rate will cause a decrease in consumer's welfare" Justify.d) If next year's income is maintained, how much would this year's income have to be for consumer to neither save nor borrow money at 10% interest rate?e) How much would interest rate have to be for consumer to consume exactly her initial endowment          (M1 = $ 1.5 million and M2 = $ 2.75…

2. Suppose you are economist and have the following data: Consumption; Income; 75 253 85 185 98 212 108 180 118 185 You want to investigate the effect of income on consumption. a)Write and estimate your model b)interpret the results

Mary has income of $2000 today and $1000 tomorrow. She can lend and borrow at an interest rate of 20%. There is 10% inflation. Her preferences for intertemporal consumption are represented by the following utility function u(c, c) = min{c1, 2c2} (a) What is her optimal consumption bundle?

Given a consumption function of C= $25 +0.75 YD, if disposable income is $1,000, then the average propensity to consume equals Multiple Choice 1.0. 0.6. 1.6. 0.4.