Question
uppose disposable income increases from R11 trillion to R12 trillion. At the same time, consumption expenditure increases from R4.2 trillion to ________. Thus, the MPC must equal
Answers
GPT-4o mini
To determine the new consumption expenditure and the marginal propensity to consume (MPC) given the changes in disposable income and consumption expenditure, we can follow these steps:
1. **Identify the change in disposable income**:
- Initial disposable income = R11 trillion
- New disposable income = R12 trillion
- Change in disposable income = R12 trillion - R11 trillion = R1 trillion
2. **Identify the initial consumption expenditure**:
- Initial consumption expenditure = R4.2 trillion
3. **Let’s denote the new consumption expenditure as \( C \)**. According to the problem, we do not have the new consumption expenditure number yet.
4. **Change in consumption expenditure**:
- Change in consumption expenditure = New consumption expenditure - Initial consumption expenditure
- This can be expressed as \( C - R4.2 trillion \)
5. **MPC (Marginal Propensity to Consume)** is defined as the change in consumption divided by the change in disposable income:
\[
\text{MPC} = \frac{\Delta C}{\Delta Y}
\]
where \( \Delta Y \) is the change in disposable income, and \( \Delta C \) is the change in consumption expenditure.
6. **Substituting in the values we have**:
- Change in disposable income \( \Delta Y = R1 trillion \)
- Change in consumption expenditure \( \Delta C = C - R4.2 trillion \)
Thus, we rewrite the MPC formula as follows:
\[
\text{MPC} = \frac{C - R4.2 trillion}{R1 trillion}
\]
**At this point, we need the new consumption expenditure \( C \) to calculate the MPC.**
If you know the expected new consumption expenditure after the increase in disposable income, you can substitute that value into the equation above to find the MPC.
**For example, if you have a hypothetical new consumption expenditure of R5 trillion**:
\[
\text{Change in consumption expenditure} = R5 trillion - R4.2 trillion = R0.8 trillion
\]
Substituting into the MPC formula gives:
\[
\text{MPC} = \frac{R0.8 trillion}{R1 trillion} = 0.8
\]
If you provide the new consumption expenditure, I can help you calculate the MPC based on that information.
1. **Identify the change in disposable income**:
- Initial disposable income = R11 trillion
- New disposable income = R12 trillion
- Change in disposable income = R12 trillion - R11 trillion = R1 trillion
2. **Identify the initial consumption expenditure**:
- Initial consumption expenditure = R4.2 trillion
3. **Let’s denote the new consumption expenditure as \( C \)**. According to the problem, we do not have the new consumption expenditure number yet.
4. **Change in consumption expenditure**:
- Change in consumption expenditure = New consumption expenditure - Initial consumption expenditure
- This can be expressed as \( C - R4.2 trillion \)
5. **MPC (Marginal Propensity to Consume)** is defined as the change in consumption divided by the change in disposable income:
\[
\text{MPC} = \frac{\Delta C}{\Delta Y}
\]
where \( \Delta Y \) is the change in disposable income, and \( \Delta C \) is the change in consumption expenditure.
6. **Substituting in the values we have**:
- Change in disposable income \( \Delta Y = R1 trillion \)
- Change in consumption expenditure \( \Delta C = C - R4.2 trillion \)
Thus, we rewrite the MPC formula as follows:
\[
\text{MPC} = \frac{C - R4.2 trillion}{R1 trillion}
\]
**At this point, we need the new consumption expenditure \( C \) to calculate the MPC.**
If you know the expected new consumption expenditure after the increase in disposable income, you can substitute that value into the equation above to find the MPC.
**For example, if you have a hypothetical new consumption expenditure of R5 trillion**:
\[
\text{Change in consumption expenditure} = R5 trillion - R4.2 trillion = R0.8 trillion
\]
Substituting into the MPC formula gives:
\[
\text{MPC} = \frac{R0.8 trillion}{R1 trillion} = 0.8
\]
If you provide the new consumption expenditure, I can help you calculate the MPC based on that information.