CBSE 2019 Class 12 Economics Delhi Set 1

Question : 3 of 19

Marks: +1, -0

Suppose in a hypothetical economy, the income rises from

\₹ 5,000

crores to

\₹ 6,000

crores. As a result, the consumption expenditure rises from

\₹ 4,000

crores to

\₹ 4,600

crores. Marginal propensity to consume in such a case would be _______. (Choose the correct alternative)

Solution:

\;\;\text " Initial income "\;=\₹ 5,000 \;\text " crores "\;

\;\;\text " New income "\;=\₹ 6,000 \;\text " crores "\;

\;\;\text " Change in income "\;(∆ {\Y})=\₹(6000-5000)

\;=\₹ 1,000 \;\text " crores "\;

\;\;\text " Initial consumption "\;=\₹ 4,000 \;\text " crores "\;

\;\;\text " New consumption "\;=\₹ 4,600 \;\text " crores "\;

\;\;\text " Change in consumption "\;=\₹(4600-4000)

\;\;\text " (C) "\;=\₹ 600 \;\text " crores "\;

\;\;\text " Marginal propensity to consume "\;

\;( {\MPC})=\;{∆ {\C}}/{ {\DY}} \;{\;\text " Change in Consumption "\;}/{\;\text " Change in income "\;}

\;=\;{600}/{1000}

\;=0.6

\;

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