Question

Supposed the disposable income ranges from 1,110,000 to 1,290,000 and it increases by 30,000 per year. Mpc = .80

When disposable income is 1,000,000 what is the level of consumption is equal to?

Answer 1

$\text{C}=\text{a}+\text{b}Y_d\\ \text{where;}\\ \text{a - autonomous consumption}\\ \text{b - MPC}\\ Y_d\, \text{- disposable income}\\ \text{therefore,}\\ C=30,000+(0.80*1,000,000)\\ C=30,000+800,000\\ C=830,000.$