Question

Consider the following facts:

a. Firm S makes 1,000 t-shirts with the cotton for a total cost of $1.50 per t-shirt. They sell all of the shirts to Firm R for $2.00 each.
b. Firm R sells 900 of the t-shirts to consumers for $10 each and the total cost of producing each shirt is $8 each.
c. There are no other firms in this simple economy.

The value of consumption spending is $______________

Answer 1

Answer and Explanation:

The computation of the  value of consumption spending is given below:

Value of consumption spending is

= Sells price to the cosnumers - producing price each shirt

= $10 - $8

= 2

ANd, the Total value is

= 8 × 900

= $7,200

The above formula should be applied for the same