Share

# Calculate Marginal Propensity to Consume from the Following Data About an Economy Which is Equilibrium: National Income = 2000 Autonomous Consumption Expenditure = 200 Investment Expenditure = 100 - CBSE (Arts) Class 12 - Economics

ConceptConsumption Function and Propensity to Save

#### Question

Calculate Marginal Propensity to Consume from the following data about an economy

Which is an equilibrium:

National income = 2000

Autonomous Consumption expenditure = 200

Investment expenditure = 100

#### Solution

Given that

National income (Y) = 2000

Autonomous consumption expenditure = 200

Investment expenditure = 100

As we know that

Y = C + I

Since C = barC + cY we have

Y = barC + cY + I

By substituting the given values,we get

2000 = 200 + c(2000) + 100

1700 = 2000c

c = 0.85

Therfore, the marginal propensity to consume is 0.8

Is there an error in this question or solution?

#### Video TutorialsVIEW ALL [1]

Solution Calculate Marginal Propensity to Consume from the Following Data About an Economy Which is Equilibrium: National Income = 2000 Autonomous Consumption Expenditure = 200 Investment Expenditure = 100 Concept: Consumption Function and Propensity to Save.
S