Use the following table with information on the consumption behavior of the people of otham to answer the following questions: Disposable Income Consumption $300 $440 $0 $200 What is the value of 'a' or autonomous consumption in this economy? . What is the value of 'b’ or the Marginal Propensity to Consume (MPC) in this economy? nterpret the meaning of this MPC value in one sentence.

ENGR.ECONOMIC ANALYSIS
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Author:NEWNAN
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Chapter1: Making Economics Decisions
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1. Use the following table with information on the consumption behavior of the people of
Gotham to answer the following questions:
Disposable Income Consumption
$300
$440
$0
$200
a. What is the value of 'a' or autonomous consumption in this economy?
b. What is the value of 'b’ or the Marginal Propensity to Consume (MPC) in this economy?
Interpret the meaning of this MPC value in one sentence.
Transcribed Image Text:1. Use the following table with information on the consumption behavior of the people of Gotham to answer the following questions: Disposable Income Consumption $300 $440 $0 $200 a. What is the value of 'a' or autonomous consumption in this economy? b. What is the value of 'b’ or the Marginal Propensity to Consume (MPC) in this economy? Interpret the meaning of this MPC value in one sentence.
Expert Solution
Step 1

The autonomous consumption does not depend on the level of income. The autonomous consumption does not fall to zero when income of consumer is zero.

The Marginal propensity to consumer = Change in consumption /change in income

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