Advance analysis: Linear equation for the consumer assumption and savings schedules takes the general form C=a+bY and S = -a+ (1-b) y, where C, S and Y are consumption, saving, and national income, respectively. The constant a represent the vertical intercept, and b represent the slop of the consumption schedule.

Using the following data to substitute numerical value for a and b in the consumption and saving equation

National income                                                                 Consumption

(Y)                                                                                                (C)

$ 0                                                                                          80

100                                                                                                         140

200                                                                                                         200

300                                                                                                         260

400                                                                                                         320

b. What is the economic meaning of b? Of (1-b)?

c. suppose that the amount of saving that occurs at each level of national income falls by $20 but that the value of b and (1-b) remains unchanged. Restate the saving and consumption equation inserting the new numerical value and cite a factor that might have caused the change.