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Impact on consumption of a 55% increase in disposable income

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Reference no: EM133543879

Assignment:

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?

Reference no: EM133543879

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