Question

Suppose you have the following information about a fictitious economy. Assume there are no taxes in this economy. Disposable Income and Consumption Disposable Income (dollars) Consumption (dollars) $0 $9,000 8,500 15,500 18,500 22,000 28,500 28,500 38,500 35,000 48,500 41,500 Instructions: In parts a and c, enter your answers as a whole number. In part b, round your answers to two decimal places. a. What is the equilibrium level of consumption

Answer 1

The equilibrium level of consumption is $28500.

The equilibrium level of consumption is at the point where the disposable income is equal to the consumption.

If this was properly placed in a tabular form, we would clearly see that when the disposable income was at $28500, the consumption in dollars was also at the same price level.

Given this condition, we can conclude in economics that consumption is at its level of equilibrium.

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