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Answer to Question #54136 in Macroeconomics for paulus
Question #54136
Use the information provided below to construct equations relating consumption and saving to disposable income:
income consumption saving tax
25 million 5 million 15 million 5 million
income consumption saving tax
25 million 5 million 15 million 5 million
Expert's answer
The consumption equation is:
C = Ca + c*(Y - T), where C - consumption, c - marginal propensity to consume, Ca - autonomous consumption, Y - income, T - tax.
c = C/Y
C = Ca + 5/25*(25 - 5) = Ca + 0.2*(Y - 5) = Ca - 1 + 0.2Y
C = Ca + c*(Y - T), where C - consumption, c - marginal propensity to consume, Ca - autonomous consumption, Y - income, T - tax.
c = C/Y
C = Ca + 5/25*(25 - 5) = Ca + 0.2*(Y - 5) = Ca - 1 + 0.2Y
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Comments
Dear visitor, consumption function defined as C = a + b(Y – T), where "a" is an autonomous consumption and "b" is the marginal propensity to consume. Savings function with respect to disposable income is S = -a + (1 – b) (Y – T).
maybe Y= I-C-T y=25-5-15 Y=5
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