Show the consumption and saving schedules graphically. Determine the APC and APS for each level of income. Now, determine the MPC and MPS for each change in the income level. Locate the break-even point. How is it possible for households to dissave low income levels?
If the proportion of total income that is consumed decreases and the profit that is saved increases as income rises, explain in both written and graphically how the MPC and MPS can be constant at various levels of income.
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MPC and MPS are computed.