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CBSE 2017 Class 12 Economics Outside Delhi Set-1

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Question : 12 of 18
Marks: +1, -0
An economy is in equilibrium. From the following data, calculate the marginal propensity to save :
(a) Income =10,000=10,000
(b) Autonomous consumption =500=500
(c) Consumption expenditure =8,000=8,000
Solution:  
Applying the equation :
c=c‾+ by c=\overline{c}+\text{ by }
Where, c=c= Consumption expenditure (8,000)(8,000)
c‾=\overline{c}= Autonomous consumption (500)
b=b= MPC (marginal propensity to consume)
y=Income (10,000)y=\text{Income}\,(10,000)
8,000=500+b×10,0008,000=500+b\times 10,000
8000=500+10,000b8000=500+10,000 b
8000−500=10,000b8000-500=10,000 b
7,500=10,000b7,500=10,000 b
b=7,50010,000b=\frac{7,500}{10,000}
b=0.75,MPC=0.75b=0.75, \text{MPC}=0.75
Now,
MPS+MPC=1\text{MPS}+\text{MPC}=1
MPS=1−MPC\text{MPS}=1-\text{MPC}
=1−0.75=0.25=1-0.75=0.25
Hence, the value of MPS =0.25=0.25
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