Question

Given that national income is ₹800 crore and consumption expenditure is ₹640 crore, what is the average propensity to consume? When income increases to ₹1000 crore and consumption increases to ₹790 crore, what will be the marginal propensity to consume?

Answer 1

`"APC" = C/Y = 640/800 = 0.8`

`"MPC" = (ΔC)/(ΔY) = (790 − 640) /(1000 − 800)`

= `150/200` 

= 0.75