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In an Economy an Increase in Investment by Rs 100 Crore Led to ‘Increase’ in National By Rs 1000 Crore. Find Marginal Propensity to Consume. - CBSE (Arts) Class 12 - Economics

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Question

In an economy an increase in investment by Rs 100 crore led to ‘increase’ in national by Rs 1000 crore. Find marginal propensity to consume.

Solution

Given that

Change in investment (ΔI)=Rs 100crore

Change in income(ΔY) = Rs 1,000crore

We know that

`1/(1-MPC) " where MPC is equal to marginal propensity to consume"`

`1/(1-MPC)=1000/100=10`

1=10-10MPC

10MPC=9

MPC=0.9

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Solution In an Economy an Increase in Investment by Rs 100 Crore Led to ‘Increase’ in National By Rs 1000 Crore. Find Marginal Propensity to Consume. Concept: Consumption Function and Propensity to Save.
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