Suppose the Consumption Function Is Given by the Equation C

question 473

Multiple Choice

Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to save?

• A) 2.0
• B) 0.2
• C) 0.8
• D) 100

---

Definitions:

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, excluding fixed overhead.

Production Cost

The total expense incurred in manufacturing a product, including raw materials, labor, and overheads.

Unit Costs

The cost incurred to produce, store, and sell one unit of a product, including direct materials, labor, and overhead expenses.

Variable Costing

A costing method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.