A country has the consumption function C = 100 + 0.8Y. Match List-I with List-II:
| List-I | List-II | ||
|---|---|---|---|
| (A) | Autonomous consumption | (I) | 0.2 |
| (B) | Marginal propensity to consume | (II) | 80 |
| (C) | Rise in consumption when income rises by Rs 100 | (III) | 100 |
| (D) | Marginal propensity to save | (IV) | 0.8 |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A) - (III), (B) - (IV), (C) - (II), (D) - (I)
In C = C̄ + cY, the constant is autonomous consumption and the coefficient of Y is the MPC.
| List-I | List-II | Reason |
|---|---|---|
| (A) Autonomous consumption | (III) 100 | The constant term is 100. |
| (B) Marginal propensity to consume | (IV) 0.8 | The coefficient of Y is 0.8. |
| (C) Rise in consumption when income rises by Rs 100 | (II) 80 | 0.8 × 100 = 80. |
| (D) Marginal propensity to save | (I) 0.2 | MPS = 1 − 0.8 = 0.2. |
NCERT (2026-27): “4.1.1 Consumption … Imagine a country Imagenia which has a consumption function described by C=100+0.8Y . This indicates that even when Imagenia does not have any income, its citizens still consume Rs. 100 worth of goods. Imagenia’s autonomous consumption is 100. Its marginal propensity to consume is 0.8. This means that if income goes up by Rs. 100 in Imagenia, consumption will go up by Rs. 80.” “Some Definitions Marginal propensity to save (MPS): it is the change in savings per unit change in income. It is denoted by s and is equal to 1 − c. It implies that s + c = 1.” |