Ask Question, Ask an Expert


Ask Microeconomics Expert

Suppose that we have a consumption function of the form

C = 220 + 0.9×Yp,

where Yp is permanent disposable income. Suppose that consumers estimate their permanent disposable income by a simple average of disposable income in the present and previous years:
Yp== 0.5×(Yd + Yd-1),

where Yd is actual disposable income.

a. Suppose that disposable income Yd is equal to $4,000 in year 1 and is also equal to $4,000 in year 2. What is consumption in year 2?

b. Suppose that disposable income increases to $5,000 in year 3 and then remains at $5,000 in all future years. What is consumption in years 3 and 4 and all remaining years? describe why consumption responds the way it does to an increase in income.

c. What is the short-run marginal propensity to consume? What is the long -run marginal propensity to consume?

d. describe why this formulation of consumption may provide a more accurate description of consumption than the simple consumption function that depends only on current income.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M945224

Have any Question? 

Related Questions in Microeconomics

Assignmentafter read two articles then answer the questions

Assignment After read two articles then answer the questions below Cellini: - How does Cellini criticize Bandinelli's sculpture Hercules and Cacus (1534)? - What technical difficulties does Cellini encounter in making hi ...

Assignmentcreate a powerpoint presentation of no more than

Assignment Create a PowerPoint presentation of no more than nine slides (excluding title and reference slides) that provides synthesis of specific elements using the research article provided in this unit's Studies, "The ...

Microeconomicsassignment capitalism and the us economyin a

Microeconomics Assignment: Capitalism and the U.S. Economy In a command or planned economy, the government, not the market, regulates the factors of production and economic activities considered essential to the function ...

You have to watch a video in youtube the age of uncertainty

You have to watch a video in youtube :The Age of Uncertainty Episode 1 - The Prophets and Promise of Classical Capitalism link is: and then write a 3pages on answering these fi ...

1 black-scholes pde show that the black-scholes price for a

1. Black-Scholes PDE: Show that the Black-Scholes price for a European Put with strike K and expiration T P(t; S t ) = Ke -r(T- t) Φ(-d 2 (T - t, S t )) - S t Φ(-d 1 (T - t, S t )), where d 1 (T - t, S t ) = (log{S t /K} ...

Assignmentlearning activity 1 - theme 1a discuss the

Assignment Learning Activity 1 - Theme 1 a.) Discuss the classifications of organizational theory and their precepts and what can we learn from its history? b.) For businesses to succeed they must maintain a competitive ...

Assignment perfectly competitive and monopoly firmsin this

Assignment: Perfectly Competitive and Monopoly Firms In this Assignment, you will calculate total cost, total revenue, and total profit/loss. Based on the computed results, you will determine the optimal quantity of outp ...

Description debentive enterprise is a company listed on the

Description: Debentive enterprise is a company listed on the New York Stock Exchange. Its capital structure is as follows: equity issued at N.Y.S.E. USD 30,000 (after translation), in addition the company has a debt of U ...

Digital media power point presentationdigital media has

Digital Media Power point presentation Digital media has changed the ways ideas, information, and arguments in society are communicated both locally and globally. Individuals and organizations frequently use digital medi ...

Principles of microeconomics assignmentquestion one the

PRINCIPLES OF MICROECONOMICS ASSIGNMENT Question One: The following table gives a total utility schedule for Michael who consumes sodas. The price of each can of soda is $50. a) Copy and complete the table. Number of can ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate