CBSE 2019 Class 12 Economics Delhi Set 1

Question : 3

Total: 19

Suppose in a hypothetical economy, the income rises from ₹5,000 crores to ₹6,000 crores. As a result, the consumption expenditure rises from ₹4,000 crores to ₹4,600 crores. Marginal propensity to consume in such a case would be _______. (Choose the correct alternative)

Solution:

‌‌ Initial income ‌=₹5,000‌ crores ‌
‌‌ New income ‌=₹6,000‌ crores ‌
‌‌ Change in income ‌(∆Y)=₹(6000−5000)
‌=₹1,000‌ crores ‌
‌‌ Initial consumption ‌=₹4,000‌ crores ‌
‌‌ New consumption ‌=₹4,600‌ crores ‌
‌‌ Change in consumption ‌=₹(4600−4000)
‌‌ (C) ‌=₹600‌ crores ‌
‌‌ Marginal propensity to consume ‌
‌(MPC)=‌

∆C

‌

‌ Change in Consumption ‌

‌ Change in income ‌

‌=‌

600

1000

‌=0.6
‌

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