How much consumption will increase when income increases by Rs. 5000 at given marginal propensity to consume of 0.60.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Increase in consumption= Rs. 3000
Change in Consumption=MPC×Change in Income
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MPC (Marginal Propensity to Consume) = 0.60
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Change in Income = ₹5000
Change in Consumption=0.60×5000 = 3,000