When Julie Ann's disposable income is $10 000,she spends $10 000,and when her disposable income is $15 000,her spending is $12 500.Julie Ann's autonomous consumption is _____ and her marginal propensity to consume is 0.5.

Question

Quizplus · Accepted Answer

Julie Ann's marginal propensity to consume (MPC) is 0.5, meaning she spends 50% of any additional income. Her spending increases by $2,500 when her income increases by $5,000, confirming the MPC. Autonomous consumption is the amount she spends when her income is zero. Using the consumption function C = a + bY, where C is consumption, a is autonomous consumption, b is MPC, and Y is income, we can solve for a: $10,000 = a + 0.5($10,000), giving a = $5,000.

When Julie Ann's Disposable Income Is $10 000,she Spends $10