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Question
At the break-even point level of incomes for the economy is ₹ 10,000 crores and if the people tends to save 20 per cent of their additional income, then calcualte the value of autonomous consumption.
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Solution
C = `bar"C"` + by ...[At Break even point]
10,000 = `bar"C"` + 0·8 (10,000)
10,000 = `bar"C"` + 8,000
10,000 - 8,000 = `bar"C"`
`bar"C"` = 2000 crores
Working Notes:
b = MPC
C = Y
S = 0
C = 10,000
MPS = 0.2 (given)
MPC = 1 - MPS
= 1 - 0.2
= 0.8
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RELATED QUESTIONS
Given the following data, find the missing value of 'Government Final Consumption Expenditure' and 'Mixed Income of Self Employed'.
| S.No. | Particulars | Amount (In ₹ crores) |
| (i) | National Income | 71,000 |
| (ii) | Gross Domestic Capital Formation | 10,000 |
| (iii) | Government Final Consumption Expenditure | ? |
| (iv) | Mixed Income of Self Employed | ? |
| (v) | Net Factor Income from Abroad | 1,000 |
| (vi) | Net Indirect Taxes | 2,000 |
| (vii) | Profits | 1,200 |
| (viii) | Wages & Salaries | 15,000 |
| (ix) | Net Exports | 5,000 |
| (x) | Private Final Consumption Expenditure | 40,000 |
| (xi) | Consumption of Fixed Capital | 3,000 |
| (xii) | Operating Surplus | 30,000 |
State the meaning of the following:
Autonomous Consumption
Final goods refer to those goods which are used either for ______ or for ______.
Consumption depends on ______
Aggregate Demand is not determined by which of the following.
Which of the following statements is true?
Read the following statements carefully:
Statement 1: The consumption curve is an upward sloping straight line curve due to the direct relationship between income and consumption and the assumption of constant Marginal Propensity to Consume.
Statement 2: Aggregate Demand curve and Consumption curve are parallel to each other.
In the light of the given statements, choose the correct alternative from the following:
"In an economy, the autonomous consumption is ₹ 100 and Marginal Propensity to Consume (MPC) is 0.6. If the equilibrium level of Income is 2,000, then the autonomous investment is ₹ 300." Justify the statement with valid calculation.
In an economy, the value of Marginal Propensity to Save (MPS) is 0.25, what will be the value of increase in income, if investments increased by ₹ 200 crores?
At zero income, what happens to consumption?
Which component of \[C=\bar{C}+cY\] is independent of income?
What is induced consumption?
Which expression represents induced consumption in the consumption function?
Within which range does the value of MPC always lie?
What does the 45° line represent?
What does it mean when the consumption curve is below the 45° line?
For the consumption function \[C=100+0.8Y\], what is autonomous consumption?
