00:01
So here we've got a couple questions, and the basic idea is that the marginal propensity to consume and the marginal propensity to save have to add up to one.
00:10
The reason is if someone gives you a dollar, you must either spend it or save it, right? there's no other choice.
00:17
You have got to either spend or save.
00:21
So each dollar needs to be split between consumption and saving.
00:24
So for the bigger question here, four, we want to construct a graph of this consumption function, so the graph of a consumption function relates income to consumption, right? and so we know that at an income of zero, we have consumption of three.
00:40
At, say, an income of two, we have 3 .5, right? at an income of four, we have four, and so on like that.
00:54
So my consumption function is the thing that goes through all these points, looks something like that, it's a straight line, it's linear.
01:01
The autonomous is, by definition, consumption when y is equal to zero, and so that means the autonomous consumption is simply going to be three, right? that's my autonomous consumption right here, that intercept.
01:22
The marginal propensity to consume is the change in consumption over the change in income...