Question

Complete the following table. Construct/Express the Consumption function at ₹ 200 crore level of income. \[ \begin{array}{|c|c|c|c|} \hline \textbf{Income (Y)} & \textbf{Savings (S)} & \textbf{Average Propensity to Consume (APC)} & \textbf{Marginal Propensity to Save (MPS)} \\ \hline 0 & -30 & 1 & 0.2 \\ 100 & 20 & 0.85 & 0.2 \\ 200 & 70 & 0.85 & 0.2 \\ 300 & 120 & 0.8 & 0.2 \\ \hline \end{array} \]

Hint:

Use savings and income data to compute consumption, APC, and MPS accurately.

Answer 1

The consumption function is derived using the formula: \[ C = Y - S \] At \( Y = 200 \): \[ C = 200 - 70 = 130 \] The APC is calculated as: \[ APC = \frac{C}{Y} \] At \( Y = 200 \): \[ APC = \frac{130}{200} = 0.85 \] The MPS is constant and calculated as: \[ MPS = 1 - MPC \]