anonymous
  • anonymous
Can anyone explain the consumption function?
Economics - Financial Markets
schrodinger
  • schrodinger
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angela210793
  • angela210793
hope it helps|dw:1327907551175:dw|
anonymous
  • anonymous
C(Consumption function) = Co + cYo Here Co is autonomous consumption i.e. Minimum amount of consumption required for survival. Co will exist even if income(Y) is zero. c = MPC (Marginal propensity to consume) = the fraction of income that is consumed. Yo = national income at some point of time. To explain what is MPC, Y = C + S Divide the equation both sides by Y Y/Y = C/Y + S/Y 1 = MPC + MPS 1 = c + s c = marginal propensity to consume s = marginal propensity to save

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