Question

Given that mational income is Rs. 80 crore and consumption expenditure is Rs. 64 crore find out average propensity to save (Aps) . When income rises to Rs. 100 crore and consumption expenditure to Rs. 78 crore , what will be APC and MPC?

Answer 1

(i) `APS =(s)/(Y) =(16=(80-64))/(80)=(1)/(5) =0.2`
(ii) when income rises to 100 crore and consumption to 78 crore , then `Delta Y =20`
`(=100-80) and Delta C=14(=78-64)`
`APC=( C)/(Y) =(78)/(100)=0.78`
`MPC =(delta C) /(deltaY) =(14)/(20)=(7)/(10)=0.70`