Question

if the consumption function is C = 50+0.75Y, write thr corresponding saving function. At what level of income saving becomes zero ?​

Answer 1

Answer:

S = 100+ 0.25 Y

Explanation:

The consumption function is C= 100+0.75Y where Y is the income at different level in the economy.

Income = consumption + savings

=> Savings = Income - consumption

=> S = Y- C

=> S = Y - ( 100 + 0.75Y)

=> S = Y- 100 - 0.75Y

=> S = - 100 + Y ( 1 - 0.75)

=> S = -100 + 0.25Y

Therefore, the saving function is S= -100 + 0.25Y where autonomous savings= -100, MPS= 0.25 and Y is income at all levels.