Question

Given that c = $1,000 0.60yd, if the level of disposable income is $1,000, the level of saving is:______

Answer 1

With a consumption function of c = $1,000 + 0.60yd and a disposable income of $1,000, the level of saving is negative $600, which indicates dissaving.

Step-by-step explanation:

The question pertains to the consumption function, which in economics is a simple formula that relates consumption spending to disposable income. Given that the consumption function is represented by c = $1,000 + 0.60yd, where c stands for consumption and yd represents disposable income, we can find the level of saving when the disposable income is $1,000.

To calculate savings, we first determine consumption:
c = $1,000 + 0.60 × $1,000
c = $1,000 + $600
c = $1,600.

Since savings are equal to disposable income minus consumption, we take the $1,000 of income and subtract the $1,600 of consumption:
Savings = $1,000 - $1,600
Savings = -$600.

Thus, at a disposable income of $1,000, the level of saving is negative $600, meaning the individual is dissaving.

Answer 2

The level of saving when the disposable income is $1,000 and consumption is $1,000 + 0.60 times the income is -$600, indicating dis-saving.

Step-by-step explanation:

If the level of disposable income is $1,000 and consumption (c) can be represented by the function c = $1,000 + 0.60 × disposable income, we can calculate the level of saving using this formula. The student is essentially being asked to determine the level of savings when income and consumption are known.

To find the level of savings, we first calculate consumption:

consumption = $1,000 + 0.60 × $1,000

= $1,000 + $600

= $1,600.

Now, to get the savings, we subtract the total consumption from disposable income:

savings = disposable income - consumption

= $1,000 - $1,600

=-$600.

This result means that the level of saving is negative, indicating the household is saving or borrowing to cover additional expenditures beyond their disposable income.