Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income. Letting C represent consumption and Y represent income, the equation that summarizes this relationship is

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The equation that summarizes the relationship between consumption and income is C = 100 + 0.8Y. This is because the household would spend $80 for each additional $100 of income, which translates to a marginal propensity to consume (MPC) of 0.8. The constant term of $100 represents the amount of consumption that would occur even with zero income. Choice A is incorrect because it does not include the constant term. Choice C is incorrect because it assumes a MPC of 1, which means the household would spend all of its income on consumption. Choice D is incorrect because it assumes a much lower MPC of 0.1.

Assume a Household Would Consume $100 Worth of Goods and Services