CBSE 2015 Class 12 Economics Delhi Set-3

Question : 2 of 3

Marks: +1, -0

An economy is in equilibrium. Find Marginal Propensity to Consume from the following :
National income

=2,000

Autonomous consumption

=400

Investment expenditure

=200

Solution:

{\C}=\ov{ {\C}}+ {\cY}

where,

\ov{ {\C}}

represents autonomous consumption expenditure

c

represents marginal propensity to consume
So,

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

Substituting the given values,

2000\;=400+c(2000)+200

2000\;=600+2000 c

or,

c\;=0.7

Thus, marginal propensity to consume is 0.7 .

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