Given the data of real disposable income also real consumption, draw consumption function, describe the slope, marginal propensity to consume, formula for consumption function.
Consider the following data :
Year Real Disposable Income Real Consumption
0 20,000 14,000
1 30,000 19,000
2 40,000 24,000
For now, assume that no other variable (besides real disposable income) that could affect real
consumption has changed between Year 0, Year 1, and Year 2.
What is the marginal propensity to consume.