**Text Transcription for Educational Website:**---Given data: $ Sa = -5000 $ and $ mpc $ or $ c = 0.8 $**Tasks:**1. **Formulate the Consumption Function & Interpret the Function:** The consumption function can be represented as: \[ C = Ca + (MPC \times Yd) \] Where: - $ C $ is the total consumption. - $ Ca $ is the autonomous consumption (-5000 in this case). - $ MPC $ is the marginal propensity to consume (0.8). - $ Yd $ is disposable income. **Interpretation:** This function indicates that consumption begins at -5000 (autonomous consumption) and increases by 0.8 units for every additional unit of disposable income. This suggests that, even with zero disposable income, consumption starts at a negative value due to prior debts or consumption financed by credit.2. **Formulate the Savings Function & Interpret the Function:** The savings function can be represented as: \[ S = Sa + (MPS \times Yd) \] Where: - $ S $ is the total savings. - $ Sa $ is the autonomous saving (-5000, indicating dissaving). - $ MPS $ is the marginal propensity to save, calculated as $ 1 - MPC = 0.2 $. - $ Yd $ is disposable income. **Interpretation:** This function shows that saving starts at -5000, indicating dissaving at zero income, and increases by 0.2 units for every additional unit of disposable income. This reflects how, initially, savings are negative, potentially due to initial consumption needs surpassing income.---Graphs and Diagrams: There are no graphs or diagrams in this image.

here we calculate the saving and consumption function , so the calculation of the following by using the given information as follow-As we know that - General Consumption Function, C = Ca + MPC x Y where Ca = autonomous consumption MPC = Marginal propensity to consume now we put the values so , we get C = 5000 + 0.8Y =Consumption Function so here we conclude that , If income is 0, then basic consumption needed for survival = 5000 ( Autonomous ) If income increases by $1, then consumption spending rises by $0.8 Now we calculate the saving Function as follow- As we know ,Savings Function: S = Sa + (1-MPC) x Y S = -5000 + 0.2Y here we conclude that , if income is 0, then there are dissaving's = -$5000 ( because 5000 is autonomous consumption) If income increases by $1, then savings rises by only $0.2

Answered: Sa = -5000 and mpc or c = 0.8 Formulate…

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Sa = -5000 and mpc or c = 0.8 Formulate the consumption function & interpret the function. Formulate the savings function & interpret the function.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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