3. Given the consumption function C = a + bY (with a > 0; 0 < b < 1): (a) Find its marginal function and its average function. (b) Find the income elasticity of consumption acy, and determine its sign, assuming Y > 0. (c) Show that this consumption function is inelastic at all positive income levels.

3. Given the consumption function C = a + bY (with a > 0; 0 < b < 1): (a) Find its marginal function and its average function. (b) Find the income elasticity of consumption acy, and determine its sign, assuming Y > 0. (c) Show that this consumption function is inelastic at all positive income levels.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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