Question

Consider the consumption function below and answer the questions that follow: C= 40 + 0.25YD

1.2. What is the value of autonomous expenditure?
1.3. What is the gradient of the consumption function?
1.4. What is the value of total consumption if disposable income is R2500?

Answer 1

Autonomous expenditure - 40.

Gradient of the consumption function-0.25.

The value of total consumption if disposable income is 2500:

C=40+0.25*2500=665