The Consumption Function of the U

question 55

Short Answer

The consumption function of the U.S. economy from 1929 to 1941 is , where 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:

Price Elasticity

A measure of the responsiveness of quantity demanded or supplied of a good to a change in its price.

Midpoint Formula

A method used in economics to calculate the elasticity of demand or supply by taking the average of the initial and final prices and quantities.

Total Revenue

The total amount of money a company receives from its goods or services, calculated by multiplying the price per unit by the number of units sold.

Quantity Effect

The impact on total consumption or production as a result of a change in quantity, holding price constant.