The Consumption Function of the U

question 199

Short Answer

The consumption function of the U.S. economy from 1929 to 1941 is , where C(x) is the personal consumption expenditure and is the personal income, both measured in billions of dollars. Find the rate of change of consumption with respect to income, . This quantity is called the marginal propensity to consume. Round the answer to three decimal places, if necessary. __________

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Definitions:

Diminishing Marginal Product

The principle stating that as additional units of a variable input are added to a fixed input, the additional output from each new unit of input will eventually decrease.

Fixed Cost

A cost that does not change with an increase or decrease in the amount of goods or services produced.

Variable Cost

Expenses that shift in proportion to the amount of production or output.

Total Output

The total quantity of goods or services produced by a firm, industry, or economy in a given period.