CBSE 2015 Class 12 Economics Delhi Set-3

Question : 2

Total: 3

An economy is in equilibrium. Find Marginal Propensity to Consume from the following :
National income =2,000
Autonomous consumption =400
Investment expenditure =200

Solution:

C=C+cY
where,
C represents autonomous consumption expenditure
c represents marginal propensity to consume
So, Y=C+CY+I
Substituting the given values,
2000‌=400+c(2000)+200
2000‌=600+2000c
or, c‌=0.7
Thus, marginal propensity to consume is 0.7 .

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