Answer questions 4a and b based on the following data for a hypothetical economy
ID: 1110703 • Letter: A
Question
Answer questions 4a and b based on the following data for a hypothetical economy.
a. Refer to the above data. The marginal propensity to consume is:
b. Refer to the above data. At the $100 level of income, the average propensity to save is:
SHOW WORK
Answer questions 4a and b based on the following data for a hypothetical economy Disposable Income $0 50 100 150 200 Savin $10 10 20 30 4. a. Refer to the above data. The marginal propensity to consume is: (3points) b. Refer to the above data. At the $100 level of income, the average propensity to save is: (2points)Explanation / Answer
a. The marginal propensity to consume is the change in consumption with respect to a change in income. Thus in this case for a $50 change income from $100 to $150, the saving increases from $10 to $20. Thus consumption rises from $90 to $130. Thus change in consumption is $40. The MPC is thus 40/50 = 80%.
b. At $100. the savings are $10. Thus the average propensity to save is 10/100 = 10%.