1. Use the following table with information on the consumption behavior of the people ofGotham to answer the following questions:Disposable Income Consumption$300$440$0$200a. 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.

Name: 1. Use the following table with information on the consumption behavi
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Description: 1. Use the following table with information on the consumption behavior of the people ofGotham to answer the following questions:Disposable Income Consumption$300$440$0$200a. What is the value of 'a' or autonomous consumption in this economy?b. What

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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.

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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