Posted by Amber on Thursday, December 10, 2009 at 2:52pm.
Savings = income - expenditures. So, for the first example savings =-50
with the answers how would i do this?
a. Graph the consumption function with consumption spending on the
vertical axis and disposable income on the horizontal axis.
b. If the consumption function is a straight line, what is its slope?
c. Fill in the saving column at each level of income. If the saving
function is a straight line, what is its slope?
a) put income on the x-axis, consumption (and savings) on the y-axis. At x=100 and y=150 put a dot. At x=200 and y=200 put another dot. Repeat for 300 and 400. Connect the dots.
b) slope is rise over run. With each 100 increase in income (run), consumption goes up by 50 (rise). So, 50/100 = .5 = slope
c) repeat for savings
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