Economics: Principles & Policy
14th Edition
ISBN: 9781337912679
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning US
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 24, Problem 3TY
To determine
The construction of consumption function and calculate the marginal propensity to consume (MPC).
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Calculate the value of MPS when the value of MPC is given to be as 0.25
You are working as an economic consultant and investigating the intertemporal
consumption choice of clothes. Your colleague suggests using the utility function:
u = min(c1, c2),
where c₁ is the consumption of clothes today and C2 is the consumption of clothes
tomorrow. Do you agree with your colleagues suggestions? Explain and if relevant
suggest an alternative.
if the value of MPC is 0.29
Find the value of MPS
Chapter 24 Solutions
Economics: Principles & Policy
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- What happens to the mulitiplier as the MPC fallsarrow_forwardCalculate the value of MPC given that:- MPS = 0.55arrow_forwardSuppose that John's MPC is constant at 4/5. If he had no income at all, he would have to borrow $2,000 to meet all his expenses. Graph John's consumption function and write it out algebraically. Using the formula for John's consumption function, find his break-even point.arrow_forward
- write a short note about the following variables and support your answers by giving examples for each variable: TFC , TC , VC , MCarrow_forwardThe function Q = F(p,ps,y) describes how the monthly demand, Q (measured in 100s of Widgets), for Grinch Inc. Widgets depends on the variables: • p = the price/Widget that Grinch Inc. sets (measured in $). • Ps= average price of substitutes for Grinch Inc. Widgets (measured in $). • y = average disposable income in the market for Widgets (measured in $1000s). When average disposable income in the market is $4200 and Grinch Inc.s price is $12 and the average price of substitutes is $11... ● Q = 66 •Op=-0.28 2ps = 0.52 ● Qy = 0.31 If average monthly income increases to $4400 and the average price of substitutes increases to $11.35, by approximately how much can Grinch Inc. increase their price while keeping demand for their Widgets fixed at Q = 66 ? Ο Δp = 0.87 O There is no way to estimate this from the given information.. Ο Δρ = 0.53 O Ap = 0.72arrow_forwardDraw a consumption function for an individual whereS=-250+0.3Y. Show the change that would result from an increase in Income.arrow_forward
- Explain carefully using a graph (that is drawn to scale) to describe a situation where it is an optimal strategy for members in a two-person household to engage in equal consumption of total household income.arrow_forwardIf the MPC is 0.31 find the value of the MPSarrow_forwardcan you please provide a explanation with any mathematical working outarrow_forward
- The nationwide COVID-19 lockdown in March 2020 resulted in a decline in spending on travel services, restaurants, and recreation as they were no longer accessible. As consumers spent more time at home, household consumption shifted to goods such as food, furnishings, and alcohol, with increases in the use of online platforms for their purchases. The gradual reopening of the economy and international borders saw household consumption recover as supply and demand for discretionary services resumed. Suppose the Consumption function of an individual is as follows: C = CO + b Yd Where C = Consumption function CO= Autonomous Consumption b = Marginal Propensity to consume Yd = Disposable income a. Illustrate the effect of change in wealth on Consumption Function. b. Illustrate the effect of a change in expected future income on Consumption Function. c. Illustrate the effect of a change in the real interest rate on the Consumption Functionarrow_forwardWhat is the type of consumption of household spending which is independentarrow_forwardExplain the term random walk in consumption. Under what conditions will consumption follow such a behaviour?.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Macroeconomics: Principles and Policy (MindTap Co...EconomicsISBN:9781305280601Author:William J. Baumol, Alan S. BlinderPublisher:Cengage Learning
Macroeconomics: Principles and Policy (MindTap Co...
Economics
ISBN:9781305280601
Author:William J. Baumol, Alan S. Blinder
Publisher:Cengage Learning
Forecasting: Exponential Smoothing, MSE; Author: Joshua Emmanuel;https://www.youtube.com/watch?v=k_HN0wOKDd0;License: Standard Youtube License