The marginal propensity to consume:
a. is the proportion of disposable income that is consumed
b. is the ratio of disposable income to consumption.
c. is the change in consumption relative to a change in disposable income.
d. minus the marginal propensity to save must equal 1.
e. is greater than 1 at all levels of income.
c
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Which of the following statements is true?
A) If higher water prices encourage a landlord to place bricks in the water tanks of his toilets to reduce water usage, then for him bricks are substitutes for water. B) If higher gasoline prices encourage a potential vacationer to stay at home and read a good book by the fire, rather than drive through the country, then for her firewood is a substitute for gasoline. C) Both A and B are true. D) None of the above are true.
Many residents of the city of Adelphia drive without automobile insurance. Assuming that Adelphia is just like any other city and these are risk averse individuals, which of the following is most likely TRUE?
A) Economic models do not work. B) These people maximize wealth. C) The price of automobile insurance exceeds their maximum value of insurance. D) There are no automobile accidents or thefts in the city of Adelphia.