BG 2400 Discussion #2 and Answers
Date: Week of Jan 16-20
Coverage: Math Review W2017
1. Math Review
When economists observe people’s behaviour, they find that how much money people spend on consumption
depends on their income. Suppose economists have observed the following:
Income (in baht) Consumption (in baht)
0 400
3000 2200
3500 2500
4000 2800
4500 3100
5000 3400
(i) What is the interpretation of the first row of the numbers, that is, when income = 0, consumption is
400? Hint: Suppose you have zero income because you do not work. However, you have positive
consumption. How is this level of consumption possible?
Ans: When people have no income, they still have to consume to survive. Their consumption (or
