CBSE 2015 Class 12 Economics Delhi Set-2

Question : 2 of 3

Marks: +1, -0

An economy is in equilibrium. Find 'autonomous consumption' from the following:
National income

=1,000

Marginal propensity to consume

=0.8

Investment expenditure

=100

Solution:

Given

{\Y}\;=1,000

{\MPC}( {\c})\;=0.8

I=100

Autonomous consumption

(\ov{ {\C}})=

??
We know that at equilibrium,

\; {\Y}\;= {\C}+ {\I}

\;\text " i.e. "\;\;1,000\;=\ov{ {\C}}+c {\Y}+ {\I}

⇒ 1,000\;=\ov{ {\C}}+0.8 × 1,000+100

⇒ 1,000\;=\ov{ {\C}}+900

⇒ 1,000-900\;=\ov{ {\C}}

\;\text " so, "\;\;\ov{ {\C}}\;=100

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