Real Disposable (Billions) Consumption Expenditures (Billions) Savings (Billions)
Income
$100 $150 ____________
200 200 ____________
300 250 ____________
400 300 ____________
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?
Really having a hard time with this question.
a. To graph the consumption function, we will plot the consumption spending on the vertical axis and disposable income on the horizontal axis.
Disposable Income (Billions) | Consumption Expenditures (Billions)
---------------------------------------------------------------
$100 | ?
200 | ?
300 | ?
400 | ?
To graph this, we first need to find out the consumption expenditures at each level of disposable income.
b. If the consumption function is a straight line, its slope will be the change in consumption divided by the change in disposable income. To find the slope, we can use any two points on the line. Let's take the first and last points:
(Disposable Income 1, Consumption 1) = ($100, ?)
(Disposable Income 2, Consumption 2) = ($400, ?)
The slope (m) can be calculated using the formula:
m = (Consumption 2 - Consumption 1) / (Disposable Income 2 - Disposable Income 1)
c. To fill in the savings column at each level of income, we need to subtract the consumption expenditures from the disposable income. If the saving function is a straight line, its slope will again be the change in savings divided by the change in disposable income. We can use the same two points as for the consumption function to calculate the slope.
(Disposable Income 1, Savings 1) = ($100, ?)
(Disposable Income 2, Savings 2) = ($400, ?)
The slope (m) for the savings function can be calculated using the formula:
m = (Savings 2 - Savings 1) / (Disposable Income 2 - Disposable Income 1)
I hope this helps! Let me know if you have any further questions.
To answer this question, we need to understand the relationship between income, consumption expenditures, and savings.
a. To graph the consumption function, we need to plot the consumption spending on the vertical axis and disposable income on the horizontal axis. The given table provides information on income and consumption expenditures, but we need the specific values to plot the graph accurately.
b. If the consumption function is a straight line, its slope can be determined using the formula: slope = change in consumption / change in income. However, without the specific values, we cannot determine the slope in this case.
c. To fill in the saving column, we need to calculate savings at each level of income. Savings can be calculated by subtracting consumption expenditures from disposable income.
Here's how you can proceed:
1. Plot the points on a graph:
- On the horizontal axis, mark the income values ($100, $200, $300, $400).
- On the vertical axis, mark the consumption expenditure values ($150, $200, $250, $300) at each income level.
2. Connect the points to form a straight line (if they are linearly related). The line represents the consumption function.
3. To calculate savings for each level of income, subtract the consumption spending from the disposable income. Fill in the savings column with the calculated values.
Once you have completed these steps, you should have a graph of the consumption function, and the savings column should be filled in. Based on these, you can determine the slope of both the consumption and saving functions if they are linear.