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If consumption function is given by :C=30 0.4Y,then determine break even level of income.?
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If consumption function is given by :C=30 0.4Y,then determine break ev...
Break Even Level of Income


The consumption function is an economic model that shows the relationship between consumption and income. It represents the level of consumption at different levels of income. The consumption function is given by:


C = 30 + 0.4Y


Determination of Break Even Level of Income


The break-even level of income is the level of income where consumption is equal to income, i.e., where C = Y. To determine the break-even level of income, we need to solve the equation:


C = Y

30 + 0.4Y = Y

0.6Y = 30

Y = 50


Therefore, the break-even level of income is 50.


Explanation of Break Even Level of Income


At the break-even level of income, consumption is equal to income. This means that individuals are not saving any money at this level of income. They are consuming all their income. As income increases above the break-even level, consumption also increases, but at a slower rate. This is because individuals tend to save some of their income as their income increases. Therefore, the consumption function has a positive slope, but it is less than one.


The break-even level of income is an important concept in macroeconomics because it is the level of income where the economy is in equilibrium. At this level of income, aggregate demand is equal to aggregate supply, and there is no inflation or recession. Therefore, policymakers aim to maintain the economy at or close to the break-even level of income by using monetary and fiscal policies to influence aggregate demand.
Community Answer
If consumption function is given by :C=30 0.4Y,then determine break ev...
Break even level of income refers to that income where the income=consumption or savings=0. Therefore,
->Y=C
-> Y=30 + 0.4Y
-> Y - 0.4Y=30
-> 0.6Y=30
-> Y= 30/0.6 = 50
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Read the report given below and answer the questions that follow:When, at a particular price level, aggregate demand for final goods equals aggregate supply of final goods, the final goods or product market reaches its equilibrium. Aggregate demand for final goods consists of ex-ante consumption, ex-ante investment, government spending, etc. The rate of increase in ex-ante consumption due to a unit increment in income is called marginal propensity to consume. For simplicity we assume a constant final goods price and constant rate of interest over short run to determine the level of aggregate demand for final goods in the economy. We also assume that the aggregate supply is perfectly elastic at this price. Under such circumstances, aggregate output is determined solely by the level of aggregate demand. This is known as effective demand principle. An increase (decreas e) in autonomous spending causes aggregate output of final goods to increase (decrease) by a larger amount through the multiplier process.The rate of increase in __________________ due to a unit increment in income is called marginal propensity to consume.

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If consumption function is given by :C=30 0.4Y,then determine break even level of income.?
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