Calculate equilibrium income

Given,

 Consumption function =600+0.7Y

Calculate equilibrium income when investment I=20

In equilibrium,

Y=C+I

Y=600+0.7Y+20

Y=620+0.7Y

Y-0.7Y=620

0.3Y=620

Y=620/0.3

Y=2066.67

Equilibrium income Y=2066.67

 

How to calculate disposable income???

 

Consumption function in economics

 Consumption function shows the positive relationship between income and consumption.

When income increases, consumption also increases for normal goods and when income decreases, consumption also decreases for normal goods.

Consumption functions can be expressed as...

C=A+bY

C=consumption function 

A=Autonomous consumption 

b=marginal propensity to consume 

Y=Disposable income.