If national income is ₹ 50 crores and saving ₹ 5 crores, find out average propensity to consume. When income rises to ₹ 60 crores and saving to ₹ 9 crores, what will be the average propensity to consume and the marginal propensity to save?
Answers
Answer:
Explanation:APC refers to Average Propensity to Consume which defines the amount of consumption in every 1 rupee of income for all level of income.
If Income= Rs. 50 crores and savings= Rs. 5 crore, then consumption = Rs. 45 crores.
APC= 45/50= 0.9.
If Income increases to Rs. 60 crores and savings to Rs. 9 crore, then consumption = Rs. 51 crores.
APC= 51/60= 0.85.
Marginal Propensity to save refers to the percentage change in savings for every one rupee of change in the income. It is the ratio between the change in income and its corresponding change in savings.
MPS= change in savings / change in income= 4/10= 0.4
Explanation:
APC refers to Average Propensity to Consume which defines the amount of consumption in every 1 rupee of income for all level of income.
If Income= Rs. 50 crores and savings= Rs. 5 crore, then consumption = Rs. 45 crores.
APC= 45/50= 0.9.
If Income increases to Rs. 60 crores and savings to Rs. 9 crore, then consumption = Rs. 51 crores.
APC= 51/60= 0.85.
Marginal Propensity to save refers to the percentage change in savings for every one rupee of change in the income. It is the ratio between the change in income and its corresponding change in savings.