Consumption and Investment in Management | Symmetry level of earnings | Average Propensity to Consume | Symmetry level of saving | Symmetry condition | Assignment Help | Homework Help

Consumption and Investment in Management Homework Help, Tutoring

Home > Economics > Macro Economics > Macro Economics For Management > Consumption and Investment in Management

Symmetry level of earnings, Average Propensity to Consume, Symmetry level of saving Assignment, Tutor Help

Consumption and Investment in Management

Illustration 125

Provided the information below, you are required to determine the average and marginal propensity to consume.

Earnings Y Value in Million $	Consumption C Value in Million $
1700	1820
1850	1900
2220	1850
2760	2150
2590	2750
2920	2450
3540	2770

Solution

Earnings Y Value in Million $	Consumption C Value in Million $	Average Propensity to Consume APC	Marginal Propensity to Consume MPC
		C / Y	Δ C / Δ Y
1700	1820	1820 / 1700 = 1.07	-
1850	1900	1900 / 1850 = 1.03	80 / 150 = 0.53
2220	1850	1850 / 2220 = 0.83	-50 / 370 = -0.14
2760	2150	2150 / 2760 = 0.78	300 / 540 = 0.56
2590	2750	2750 / 2590 = 1.06	600 / -170 = -3.53
2920	2450	2450 / 2920 = 0.84	-300 / 330 = -0.91
3540	2770	2770 / 3540 = 0.78	320 / 620 = 0.52

Illustration 126

Provided the saving function S = - 60 + 0.6Y and self-governed investment, I = $300 million. You are required to find out the following

The Symmetry level of earnings
The level of consumption
If investment enhances permanently by $30 millions, what will be the new levels of earnings and consumption

Solution

As per saving investment approach, symmetry level of national earnings is found out by balancing saving and investment and hence

                                                S          =          I
Hence,
                                    - 60 + 0.6Y      =          300

                                                0.6Y    =          240

                                                Y         =          240 / 0.6

(i) Hence symmetry of Earnings (Y) = 400

As per consumption function, Consumption parities earnings over savings and hence

C = Y – S …..Equation (2)
Hence,
S = - 60 + 0.6Y …..Equation (1)

Substituting the value of Y in the Equation (1), we procure the following

S = - 60 + 0.6 (400)

= - 60 + 240

Hence Saving (S) = 180

Substituting the value of S and I in the Equation (2), we have the following

C = 400 – 180

(ii) Hence the level of consumption (C) = 220

With the increase in investment by $30 millions, the new investment parities to $330 millions

S = I
Hence,

- 60 + 0.6 Y = 330

0.6 Y = 330 + 60

Y = 390 / 0.6

(iii) Hence, the new level of earnings would be (Y) = $650 millions

Now, Saving = - 60 + 0.6 Y

= - 60 + 0.6 (650)

= - 60 + 390

Hence Saving (S) = 330

Substituting the new values of S and Y, the new consumption (C) would be devised as below

C = Y - S

= 650 – 330

(iii) Hence, the new level of consumption would be (C) $320 millions.

Illustration 127

Provided the data below, Earnings and Consumption based on which you are necessary to ascertain the following

Average Propensity to Consume
Average Propensity to Save
Marginal Propensity to Consume and
Marginal Propensity to Save

Earnings Y Value in Million $	Consumption C Value in Million $
360	360
480	460
600	560
720	660
840	760
960	860

Solution

Earnings Y Value in Million $	Consumption C Value in Million $	Average Propensity to Consume APC	Average Propensity to Save APS	Marginal Propensity to Consume MPC	Marginal Propensity to Save MPS
		APC = C / Y	APS = S / Y (1 – APC)	MPC = Δ C / Δ Y	MPS = Δ S / Δ Y (1 - MPC)
360	360	360 / 360 = 1 or 100%	0	-	-
480	460	460 / 480 = 0.96 0r 96%	0.04	100 / 120 = 0.83	0.17
600	560	560 / 600 = 0.93 or 93%	0.07	100 / 120 = 0.83	0.17
720	660	660 / 720 = 0.92 or 92%	0.08	100 / 120 = 0.83	0.17
840	760	760 / 840 = 0.91 or 91%	0.09	100 / 120 = 0.83	0.17
960	860	860 / 960 = 0.89 or 89%	0.11	100 / 120 = 0.83	0.17

Illustration 128

In an economy, the basic equations are as follows:

The consumption function is C = 220 + 0.5Y and

Investment function is Ī = 250

You are required to ascertain the following

Symmetry level of earnings
Symmetry level of consumption
Symmetry level of saving
Symmetry level, aggregate demand equals aggregate supply and saving leakages equals investment injections

Solution

The symmetry condition is given as Y = C + I

Thus,
Y                     =          220 + 0.5Y + 250

Y – 0.5 Y         =          470

Y (1 – 0.5)      =          470

0.5Y                =          470

Y = 470 / 0.5

(a) Hence, the symmetry level of earnings (Y) = 940

The consumption function is C = 220 + 0.5Y

When Y = 940,
C = 220 + 0.5 (940)

C = 220 + 470

(b) Hence, the symmetry level of consumption (C) = 690

The saving equation is S = Y – C

When Y = 940 and C = 690, we have

S = 940 – 690

(c) Hence, the symmetry level of saving (S) = 250

(d) Now the aggregate demand and aggregate supply has to be equal for symmetry level which parities saving leakages and investment injections.

Hence,
C + I = C + S

690 + 250 = 690 + 250

940 = 940

(Or) Saving equals investment            S          =          I

                                                            250      =          250

Illustration 129

Let us assume the consumption function is C = Ca + b Y and investment is I = Ī, then

Determine the equation for the symmetry level of productivity
Determine the symmetry level of productivity when Ca = 250, b = 0.6 and Ī = 450

Solution

The symmetry condition is given as Y = C + I.

                        Y         =          Ca + b Y + Ī

            Y – b Y           =          Ca + Ī

            Y (1 – b)          =          Ca + I

(a)                    Y         =         Ca + Ī                         ……..Derivative (1)
                                                (1 – b)

Substituting the values in the Derivative (1), we obtain the following

                        Y         =          250 + 450
                                                1     -   0.6

                        Y         =          700 / 0.4

(b) Hence, the symmetry productivity level is 1,750

Online Live Tutor Symmetry level of earnings, Average Propensity to Consume, Symmetry level of saving:

We have the best tutors in Economics in the industry. Our tutors can break down a complex Symmetry level of earnings, Average Propensity to Consume, Symmetry level of saving problem into its sub parts and explain to you in detail how each step is performed. This approach of breaking down a problem has been appreciated by majority of our students for learning Symmetry level of earnings, Average Propensity to Consume, Symmetry level of saving concepts. You will get one-to-one personalized attention through our online tutoring which will make learning fun and easy. Our tutors are highly qualified and hold advanced degrees. Please do send us a request for Symmetry level of earnings, Average Propensity to Consume, Symmetry level of saving tutoring and experience the quality yourself.

Online Consumption and Investment in Management Help:

If you are stuck with an Consumption and Investment in Management Homework problem and need help, we have excellent tutors who can provide you with Homework Help. Our tutors who provide Consumption and Investment in Management help are highly qualified. Our tutors have many years of industry experience and have had years of experience providing Consumption and Investment in Management Homework Help. Please do send us the Consumption and Investment in Management problems on which you need help and we will forward then to our tutors for review.

Other topics under Macro Economics For Management:

Click for More Uploads