Read the passage carefully and answer the questions based on the passage:
Calculate various parameters of Aggregate Demand, Aggregate Supply and related concepts
|
Income (in Crore) |
Consumption (in crore) |
|
0 |
50 |
|
50 |
75 |
|
100 |
100 |
|
200 |
150 |
|
300 |
200 |
|
400 |
250 |
Calculate Marginal Propensity to Save (MPS) and Average Propensity to Consume (APC) at income level of 200.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → MPS = 0.5; APC = 0.75
1. MPS= ΔS/ ΔY
We need to find the change in Saving and Income around the income level of ₹200 crore.
| Income (₹ crore) | Consumption (₹ crore) | Saving = Income – Consumption |
|---|---|---|
| 100 | 100 | 0 |
| 200 | 150 | 50 |
ΔS= 50 - 0 = 50
ΔY= 200- 100 = 100
MPS = 50/100 = 0.5
2. Average Propensity to Consume (APC) = Consumption /Income
= 150 /200 = 0.75