2. Data on before-tax income, taxes paid, and consumption spending for the Simpson family in various years are given below: (LO2) Before-tax income ($) Taxes paid ($) Consumption spending ($) 25,000 3,000 20,000 27,000 3,500 21,350 28,000 3,700 22,070 30,000 4,000 23,600

a. Graph the Simpsons’ consumption function and find their household’s marginal propensity to consume.

b. How much would you expect the Simpsons to consume if their income was $32,000 and they paid taxes of $5,000? c. Homer Simpson wins a lottery prize. As a result, the Simpson family increases its consumption by $1,000 at each level of after-tax income. (“Income” does not include the prize money.) How does this change affect the graph of their consumption function? How does it affect their marginal propensity to consume?