Ask Question
5 February, 23:45

The Wong family has a disposable income of $70,000 annually. Currently, the Wong family spends 80% of new disposable income on consumption. Assume that their marginal propensity to consume is 0.8 and that their autonomous consumption spending is equal to $10,000.

What is the amount of the Wong family's annual consumer spending?

+4
Answers (2)
  1. 6 February, 00:02
    0
    Answer:The answer is $330,000

    Explanation:

    80% of $70,000 = consumption

    = $56,000, MPC = 0.8

    C = a + by where a = autonomous consumption, b = MPC, The value of output is equal to households disposable income (Y = yd)

    C = 56,000 + 0.8yd, consumption spending = 10,000

    Y = C + I

    Y = 56,000 + 0.8yd + 10,000

    Rearrange the equation

    Y - 0.8 = 5,600 + 10,000

    Factor out variable Y

    (1-0.8) Y = 56,000 + 10,000

    Simplify

    0.2Y = 66,000

    Divide both sides by 0.2

    0.2Y / 0.2 = 66,000 / 0.2

    Y = 330,000

    Therefore the amount of Wong family annual consumer spending is $330,000
  2. 6 February, 02:40
    0
    Annual consumer spending for the Wong family is = $58.000

    Explanation:

    Disposable income $70,000

    Marginal propensity to consume 0.8

    Autonomous consumption spending $10,000.

    If the disposable income (the money needed to survive) is $10.000 then the $60.000 left to complete $70.000 will be consumed at a rate of 80% or 0.8 cents per each dollar received. Therefore,

    Annual consumer spending = $10.000 + ($60.000*0.8)

    Annual consumer spending = $10.000 + $48.000

    Annual consumer spending = $58.000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “The Wong family has a disposable income of $70,000 annually. Currently, the Wong family spends 80% of new disposable income on consumption. ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers