Question

The consumption function of an economy is given as: C=60+0.6Y. For the given consumption function, calculate the break-even level of income.

Answer 1

We know, at break-even point, Consumption ( C) = Income (Y).
Putting Y = C in the consumption function (c=60+0.6Y), we get: Y = 60+0.6Y
Y-0.6 Y= 60
0.4 Y = 60
Y = Break-even level of income = 150