Consider the following functions:C=200+0.7YWhat is the marginal propensity to consume?

1. Break Down the Problem

To find the marginal propensity to consume (MPC), we need to understand the given consumption function: $C = 200 + 0.7Y$ where $C$ is consumption and $Y$ is income.

2. Relevant Concepts

The marginal propensity to consume is defined as the change in consumption resulting from a change in income. Mathematically, it can be expressed as: $\text{MPC} = \frac{\Delta C}{\Delta Y}$

3. Analysis and Detail

In the given consumption function, the term $0.7Y$ represents how much consumption changes with a change in income. Here, the coefficient of $Y$ (which is 0.7) indicates the change in consumption for each additional unit of income. Thus:

• If income ($Y$) increases by 1 unit, consumption ($C$) will increase by 0.7 units.

4. Verify and Summarize

Thus, the marginal propensity to consume from the provided consumption function is $0.7$. This means that for every additional dollar of income, consumption increases by 70 cents.

Final Answer

The marginal propensity to consume (MPC) is $0.7$.