Suppose measures an economy's personal consumption expenditure and x the personal income, both in billions of dollars. Then, measures the economy's savings corresponding to an income of x billion dollars. Then . The quantity dS/dx is called the marginal propensity to save.
For the consumption function , find the marginal propensity to save.

Question

Suppose  measures an economy's personal consumption expenditure and x the personal income, both in billions of dollars. Then,  measures the economy's savings corresponding to an income of x billion dollars. Then  . The quantity dS/dx is called the marginal propensity to save.
For the consumption function  , find the marginal propensity to save.

Quizplus · Accepted Answer

The marginal propensity to save is defined as the change in savings corresponding to a change in income. Mathematically, it is represented as dS/dx. 
To find this for the consumption function, we first need to write down the equation for savings. From the given information, we know that:
Savings = Income - Consumption
or, S = x - C(x)

Taking the derivative with respect to x, we get:
dS/dx = 1 - dC/dx

So, the marginal propensity to save is equal to 1 minus the marginal propensity to consume. Looking at the options, we can see that choice C matches this criteria: 11eaa8b1_dbeb_c197_b1b6_351a75c6a08e_TB6026_11.

Suppose Measures an Economy's Personal Consumption Expenditure and X