Macroeconomics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280601
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Chapter 8, Problem 3TY
To determine
To draw:A consumption function from the data given in table and find MPC.
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Chapter 8 Solutions
Macroeconomics: Principles and Policy (MindTap Course List)
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- Suppose that John's MPC is constant at 4/5. If he had no income at all, he would have to borrow $2,000 to meet all his expenses. Graph John's consumption function and write it out algebraically. Using the formula for John's consumption function, find his break-even point.arrow_forwardFrom the graph above, complete the aggregate consumption function from the information provided. C = ___ + ___Yarrow_forward2. What is the domain and range of the consumption function C = 12 + 0.3Y? Write them as a set. What is the economic interpretation of 0.3 here?arrow_forward
- Let S represent the amount of steel produced (in tons). Steel production is related to the amount of labor used (L) and the amount of capital used (C) by the following function. S = 20L 0.30c0.70 In this formula L represents the units of labor input and C the units of capital input. Each unit of labor costs $50, and each unit of capital costs $100. (a) Formulate an optimization problem that will determine how much labor and capital are needed in order to produce 55,000 tons of steel at minimum cost. Min 50L + 100C s.t. ,0.300.70 20L = 55,000 L, C 2 0 (b) Solve the optimization problem you formulated in part (a). (Hint: When using Excel Solver, start with an initial L > 0 and C > 0. Round your answers to the nearest integer.) at (L, C) = ( 2467, 2880 2$arrow_forwardDraw a consumption function for an individual whereS=-250+0.3Y. Show the change that would result from an increase in Income.arrow_forwardHand written solutions are strictly prohibitedarrow_forward
- Elena consumes bundles of food and transportation. In order to understand her behavior, we use a graph of her consumption space in which we draw two axes. We measure food in the horizontal axis and transportation in the vertical axis. Which of the following bundles has the largest amount of food (if the bundles are written consistently with the way we graph consumption)? (80, 100) (99,150) (100,80) (95,95) (98,98)arrow_forwardIf the MPC is 0.31 find the value of the MPSarrow_forwardConsider the following graph: Consumption 8,000 4,000 The slope is: 1.2 2.5 A 0.4 B 10,000 Disposable income indeterminate from this information 20,000arrow_forward
- If the MPC is 0.9 find the value of MPS using the formulaarrow_forwardSuppose that the least amount of goods and services that Roberto will consume in a year is $40,000. Roberto tends to save $0.30 of every dollar of disposable income that he makes. Use the given line to graph Roberto's consumption function for disposable income levels between $0 and $200,000. Move each endpoint to the appropriate spot on the graph.arrow_forwardWhat is the type of consumption of household spending which is independentarrow_forward
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