CBSE 2017 Class 12 Economics Delhi Set-1

Question : 13

Total: 18

An economy is in equilibrium. From the following data about an economy, calculate autonomous consumption.
(a) Income =5000
(b) Marginal propensity to save =0.2
(c) Investment expenditure =800

Solution:

Given that, Income (y)=5000
Marginal Propensity to save ( s)=0.2
Therefore, marginal propensity to consume

=1−‌ MPS
=1−0.2=0.8
∴‌‌Y=C+by+I
⇒‌‌5000=C+0.8×5000+800
⇒5000=C+4000+800
⇒‌‌5000=C+4800
⇒‌‌5000−4800=C
⇒200=C
⇒ Autonomous Consumption =200

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