Question

An economy is in equilibrium. From the following data, calculate the marginal propensity to save:
Given the behaviour of marginal product and total product as more and more units of only one input are employed while keeping other inputs as constant.
(a) Income = 10,000
(b) Autonomous consumption = 500
(c) Consumption expenditure = 8,000

Answer 1

`Y=C+I`
`Y=overset(-)C+MPC(Y)`
`8000=500+MPC(10000)`
`MPC=(8000-500)/(10000)=(7500)/(10000)=0.75`
`MPS=1-MPC=1-0.75=0.25 or 1//4`