Question - Assume that Graeme had $300,000 of disposable income and spent $180,000 on consumption in 2006 and had $400,000 of disposable income and spent $240,000 on consumption in 2007. (15 Marks)
1. What was Graeme's average propensity to consume in 2006?
2. What was Graeme's average propensity to consume in 2007?
3. What is Graeme's marginal propensity to consume?
4. If Graeme's income increase to $400,000 in 2008, how much would he be likely to spend on consumption that year? What would be his average propensity to consume?