Question

Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income. Letting C represent consumption and Y represent income, the equation that summarizes this relationship is________.

Answer 1

C = 100 + 0.8Y

Step-by-step explanation:

$100 represents autonomous consumption. It is consumption that would take place even if income was 0.

0.8Y represents income dependent on income. The higher income is, the higher this component of consumption.

0.8 = $80/100

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