CBSE 2014 Class 12 Economics Delhi Set-2

Question : 3

Total: 4

Calculate autonomous consumption expenditure from the following data about an economy which is in equilibrium.
National income =1200
Marginal propensity to save =0.20
Investment expenditure =100

Solution:

We have,
Y=C+I
where,
I is investment expenditure which is given as 100. Y is income which is given as 1200 and, C =C+cY here,

−

is autonomous consumption expenditure is marginal propensity to consumer, c=1 - marginal propensity to consume (mps) so, c=1−0.20=0.80. Thus, putting the values in the equation, Y=

−

+cY+I or, 1200=C+ 0.80×1200+100 or, C=1200−1060=140. Thus, autonomous consumption expenditure is 140 .

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