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Scrat [10]
3 years ago
15

Given a consumption function of c = $25 + 0.75yd, the average propensity to consume equals 1 when disposable income equals

Mathematics
1 answer:
Sphinxa [80]3 years ago
7 0

Answer: Disposable income = $100.

Explanation:

Since we have given that

C=\$25+0.75Y

And, average propensity to consume = 1

i.e. APC = 1

As we know the formula of APC ,

APC=\frac{C}{Y}=1\\\\\implies C=Y

So, our equation becomes,

Y=\$25+0.75Y\\\\Y-0.75Y=\$25\\\\0.25Y=\$25\\\\y=\frac{25}{0.25}\\\\Y=100

Hence, Disposable income = $100.

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