Question

Explain the psychological law of consumption.if the consumption function of an economy is c=200+0.8y then derive the corresponding saving function.

Answer 1

Answer:

idk law, but derivation is..

Explanation:

C=200+0.8Y

Autonomous consumption=200

here, C=200, Y=0 Then, S=0

MPS=0.8

We know that...MPS+MPC=1

MPS=1-MPC

MPS=1-0.8

MPS=0.2

We know that..

Saving function= -autonomous consumption+ MPS(Y)

S=-200+0.2Y