Question

CBSE Questions
Given that national income is 80 crore and consumption expenditure 64 crore, find
out average propensity to save. When income rises to 100 crore and consumption
expenditure to 78 crore, what will be the average propensity to consume and the
marginal propensity to consume?
​

Answer 1

Explanation:

Income (Y) = 80crore

consumption (C) = 64

Average propensity to save

APS = S/Y = Y-C / Y

= 80-64/80 = 0.2

APS = 0.2

Average propensity to consume

APC = C/Y = 78/100= 0.78

APC = 0.78

Marginal propensity to consume

MPC = ∆C/∆Y

= 78-64/100-80

= 0.7

MPC = 0.7