#### Question

The consumption expenditure Ec of a person with the income x. is given by Ec = 0.0006x2 + 0.003x

Find MPC, MPS, APC and APS when the income x = 200.

#### Solution

The expenditure EC of a person with income x is

given by

`EC = [0.0006]x^2 + [0.003]x`

So, marginal propensity to consume (MPC) = `d E_c/(dl)`

∴ MPC =` (d E_c)/d_x= 2 (0.0006) x +

(0.003)`

= 0.0012 x + 0.003

MPC at x = 200 is

=`0.0012(200)+0.003`

=`0.24+0.003`

=`0.243`

As MPC + MPS = 1

MPS = 1 – MPC

= 1 – 0.0243

= 0.757

Now APC=`E_C/x`

= 0.0006 x + 0.003

At x = 200

APC = 0.0006 × 200 + 0.003

= 0.12 + 0.003

= 0.123

As APS = 1 – APC

= 1 – 0.123

= 0.877

Is there an error in this question or solution?

#### APPEARS IN

Solution The Consumption Expenditure Ec of a Person with the Income X. is Given by Ec = 0.0006x2 + 0.003x Find Mpc, Mps, Apc and Aps When the Income X = 200. Concept: Increasing and Decreasing Functions.