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CBSE 2019 Class 12 Economics Delhi Set 1

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Question : 3 of 19
Marks: +1, -0
Suppose in a hypothetical economy, the income rises from ₹5,000\text{₹} 5,000 crores to ₹6,000\text{₹} 6,000 crores. As a result, the consumption expenditure rises from ₹4,000\text{₹} 4,000 crores to ₹4,600\text{₹} 4,600 crores. Marginal propensity to consume in such a case would be _______. (Choose the correct alternative)
Solution:  
Initial income=₹5,000 crores\text{Initial income} = \text{₹} 5,000 \text{ crores}
New income=₹6,000 crores\text{New income} = \text{₹} 6,000 \text{ crores}
Change in income(ΔY)=₹(6000−5000)\text{Change in income} (\Delta Y) = \text{₹}(6000-5000)
=₹1,000 crores= \text{₹} 1,000 \text{ crores}
Initial consumption=₹4,000 crores\text{Initial consumption} = \text{₹} 4,000 \text{ crores}
New consumption=₹4,600 crores\text{New consumption} = \text{₹} 4,600 \text{ crores}
Change in consumption=₹(4600−4000)\text{Change in consumption} = \text{₹}(4600-4000)
 (C) =₹600 crores\text{ (C) } = \text{₹} 600 \text{ crores}
Marginal propensity to consume\text{Marginal propensity to consume}
(MPC)=ΔCDYChange in ConsumptionChange in income(MPC) = \frac{\Delta C}{DY} \frac{\text{Change in Consumption}}{\text{Change in income}}
=6001000= \frac{600}{1000}
=0.6= 0.6
  \;
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