Final answer:
Total consumption is calculated by adding autonomous consumption to the product of the marginal propensity to consume and disposable income. With an autonomous consumption of $500 and a marginal propensity to consume of 0.8 on a disposable income of $2,000, the total consumption would be $2,100.
Step-by-step explanation:
When given that the disposable income is $2,000, autonomous consumption is $500, and the marginal propensity to consume is 80% or 0.8, we can calculate the total level of consumption using the formula for the consumption function.
The consumption function is a formula used to compute the total consumption in an economy or by an individual given a certain amount of disposable income.
The formula is: Consumption = Autonomous Consumption + (Marginal Propensity to Consume × Disposable Income).
So, the level of total consumption would be:
$500 (autonomous consumption) + (0.8 × $2,000)
= $500 + $1,600
= $2,100.
This means that out of a disposable income of $2,000, the individual will spend $2,100 on consumption, which includes autonomous consumption and consumption out of the additional income based on the marginal propensity to consume.