On the basis of following schedule, answer the given questions: Income (in ₹ crores) Savings (in ₹ crores) 0 -20 50 -10 100 0 150 30 200 60 (a) Calculate Marginal Propensity to Save (MPS) at ₹150 crores level of income. (b) What is the value of Autonomous Consumption?

CBSE 2022 Class 12 Economics Outside Delhi Set 1 (Term 2)

Question : 3 of 19

Marks: +1, -0

On the basis of following schedule, answer the given questions:

(a) Calculate Marginal Propensity to Save (MPS) at ₹150 crores level of income.
(b) What is the value of Autonomous Consumption?

Solution:

(Y) Income (in crores)	(S) Savings (in crores)	ΔS (in crores)	ΔY (in crores)
0	-20	-	-
50	-10	$-10-(-20)=10$	$50-0=50$
100	0	$0-(-10)=10$	$100-50=50$
150	30	$30-0=30$	$150-100=50$
200	60	$60-30=30$	$200-150=50$

(a)

\;\text " MPS at "\; 150\;=\;{∆ S}/{∆ Y}

\;=\;{30}/{50}=0.6

(b) Autonomous consumption (consumption at 0 level of income)

{\Y}- {\S}=0-(-20)=20

crores.
OR

{\MPC}\;=75 \%=0.75

∆ {\I}\;=1,000

∆ {\Y}\;=?

{\K}\;=\;{1}/{1- {\MPC}}

\;=\;{1}/{1-0.75}=\;{1}/{0.25}=4

{\K}\;=\;{∆ {\Y}}/{∆ {\I}}

4\;=\;{∆ {\Y}}/{1000}

4 × 1000\;=∆ Y

\₹ 4,000\;=∆ Y

Thus, the increase in income

=\₹ 4,000

crores

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