word problem: Economicsts frequenly use linear models as app

[fe05fe]

Economicsts frequenly use linear models as approximations for more complicated models. In Keynesian macroeconomics theory, total consumption expendiure on goods and services, C, is assumed to be a linear functions of national income, I. The table gives the values of C, and I for 1990 and 1997 in the United States.

|-----------------|------|------|
|      year       | 1990 | 1997 |
|-----------------|------|------|
|      total      |      |      |
| consumption (c) | 3839 | 5494 |
|-----------------|------|------|
|     National    |      |      |
|    Income (I)   | 6650 | 4215 |
|-----------------|------|------|

a. Find the formula for C as a function of I.

b. The slope of the linear function is called the marginal propensity to consume. What is the marginal propensity to consume for the United State from 1990 to 1997 ?

 

[tkhunny]

You should have a bit of an algebra background in order to be in this course.

Have you met the "Two-Point Form" or maybe the "Point-Slope Form" of a linear equation? You'll need one of those.