(Advanced analysis)If the equation for the consumption schedule is C = 20 + .8Y,where C is consumption and Y is disposable income,then the average propensity to consume is 1 when disposable income is:
A) $80.
B) $100.
C) $120.
D) $160.

Question

Quizplus · Accepted Answer

The average propensity to consume (APC) is the ratio of consumption (C) to disposable income (Y). 
So, APC = C/Y

Given, C = 20 + 0.8Y 
Substituting this in the formula for APC: 
APC = (20 + 0.8Y)/Y

We need to find the value of Y for which APC = 1. 
So, 1 = (20 + 0.8Y)/Y

Simplifying this equation, we get: 
Y = $100

Therefore, the average propensity to consume is 1 when disposable income is $100.

(Advanced Analysis)If the Equation for the Consumption Schedule Is C