The consumption function in a certain economy is given by ...

The consumption function in a certain economy is given by $$\begin{array}{l}\text { The to the } \\\qquad \begin{array}{ll}\text { (?) }=0.75 y+6 \\\text { (?) } 557\end{array} \end{array}$$ where $C(y)$ is the personal consumption expenditure, $y$ is the disposable personal income, and both $C(y)$ and $y$ are measured in billions of dollars. Find $C(0), C(50),$ and $C(100)$.

The consumption function in a certain economy is given by
$$\begin{array}{l}\text { The to the } \\\qquad \begin{array}{ll}\text { (?) }=0.75 y+6 \\\text { (?) } 557\end{array}
\end{array}$$
where $C(y)$ is the personal consumption expenditure, $y$ is the disposable personal income, and both $C(y)$ and $y$ are measured in billions of dollars. Find $C(0), C(50),$ and $C(100)$.

Labs

Want to see this concept in action?

NEW

Explore this concept interactively to see how it behaves as you change inputs.

View Labs

Key Concepts

Marginal Propensity to Consume (MPC)

The marginal propensity to consume is the proportion of an additional unit of income that is spent on consumption. In the linear consumption function, it is represented by the coefficient of disposable income, indicating how sensitive consumption is to changes in income.

Autonomous Consumption

Autonomous consumption refers to the level of consumption that occurs even when disposable income is zero. It represents the baseline level of expenditure that households undertake out of necessity, and in the consumption function, it appears as the constant term.

Consumption Function

A consumption function represents the relationship between total consumption and disposable income in an economy. It is used to model how much households are likely to spend out of their income, and it forms a fundamental part of Keynesian economic models by linking income levels to consumer expenditures.

Disposable Personal Income

Disposable personal income is the amount of money that households have available for spending and saving after accounting for taxes and transfers. It is a key determinant in consumption functions as it indicates the income level that drives consumer purchasing behavior.

Transcript

Please give Ace some feedback