Q1. Assume that Mr. Brown's MPS=MPC. If he makes an extra $1,000 this year, and this increase in his income does not change his marginal propensities, how much of this $1,000 will Mr.Brown save?
Q2. Consider chip plants: potato and computer. Assume there is a large rise in the demand for computer chips and potato chips.
a. How responsive to demand is each in the market period?
b. Describe what a manufacturer of each product might do in the short run to increase production.
c. How does the long run differ for these products?