Question

explain the relationship between income and consumption using and APC schedule and diagram that is compare y and c see at different level of income in a diagram and its schedule​

Answer 1

Answer:

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Answer 2

Explanation:

Consumption function refers to the standard equation of consumption which defines the relationship between consumption and income where consumption value can be derived at each level with the use of income value.

C= c+ bY where c=autonomous consumption, b= marginal propensity to consume, and Y= income.

The autonomous consumption is 60 crores and MPC= 0.6.

Now, derive the consumption from different level of income.

Income (Y)

(Rs. Crores)

Consumption(C)

(Rs. Crores)

C=c¯+b(Y)C=c¯+b(Y)

0 60(=60+0.6×0)60(=60+0.6×0)

100 120(=60+0.6×100)120(=60+0.6×100)

200 180(=60+0.6×200)180(=60+0.6×200)

300 240(=60+0.6×300)240(=60+0.6×300)

400 300(=60+0.6×