Answer:
Consumption & Income are directly related, consumption function is upward sloping.
Part 1) c = 110 ; Part 2) y = 360
Step-by-step explanation:
Consumption Function shows the relationship between income & consumption level.
c = a + by ; where c = consumption , y = income , a = autonomous consumption at 0 income, b = change in consumption with change in income (marginal propensity to consume MPC)
Consumption 'c' is positively (directly) related to income 'y', as denoted by positive MPC 'b' . Higher income implies higher consumption, lower income implies lower consumption.
As 'c' & 'y' are positively correlated, the graph is upward sloping.
If a = 10 , b = 0.5 , y = 200 :- c = 10 + 0.5 (200) = 10 + 100
c = 110
If c = 100 , a = 10 , b = 0.25 :- 100 = 10 + 0.25 (y) → 90 = 0.25y
y = 90 x 0.25 , y = 360
