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CBSE 2014 Class 12 Economics Outside Delhi Set-1

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Question : 14 of 19
Marks: +1, -0
Calculate Marginal Propensity to Consume from the following data about an economy which is in equilibrium:
National income =2000=2 0 0 0
Autonomous consumption expenditure =200=200
Investment expenditure =100=100
Solution:  
Given,
National Income (Y)=2000(Y)=2000
Autonomous consumption expenditure =200=200
Investment expenditure =100=100
As we know in equilibrium,
Y=C+IY=C+I
Since, C=C+cYC=C+c Y
We get Y=C+cY+IY=C+cY+I
2000  =200+c(2000)+1002000\;=200+c(2000)+100
1700  =2000c1700\;=2000c
⇒c  =0.85\Rightarrow c\;=0.85
Therefore, marginal propensity to consume is 0.85 .
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