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Question
On the basis of following schedule, answer the given questions:
| Income (in ₹ crores) |
Savings (in ₹ crores) |
| 0 | -20 |
| 50 | -10 |
| 100 | 0 |
| 150 | 30 |
| 200 | 60 |
- Calculate Marginal Propensity to Save (MPS) at ₹ 150 crores level of income.
- What is the value of Autonomous Consumption?
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Solution
| (Y) (in crores) |
(S) (in crores) |
ΔS (in crores) |
ΔY (in crores) |
| 0 | -20 | - | - |
| 50 | -10 | - 10 - (20) = 10 | 50 - 0 = 50 |
| 100 | 0 | 0 - (-10) = 10 | 100 - 50 = 50 |
| 150 | 30 | 30 - 0 = 30 | 150 - 100 - 50 |
| 200 | 60 | 60 - 30 = 30 | 200 - 150 = 50 |
(a) MPS at 150 = `"ΔS"/"ΔY"`
= `30/50`
= 0.6
(b) Autonomous consumption (consumption at 0 level of income) Y- S =
= 0 - (-20)
= 20 crores.
RELATED QUESTIONS
What is marginal propensity to consume?
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
Consumption depends on ______
Which of the following statements is true?
Read the following statements carefully:
Statement 1: The induced consumption shows, the direct relation between consumption and income.
Statement 2: With a certain increase in income, induced consumption also increases.
In the light of the given statements, choose the correct alternative from the following:
Statement 1: Consumption function assumes that, consumption changes at a constant rate as income changes.
Statement 2: Autonomous consumption is the ratio of total consumption (C) to total income (Y).
In light of the given statements, choose the correct alternative from the following:
If in an economy, the Investment Multiplier is 4 and Autonomous Consumption is ₹ 30 crore, the relevant consumption function would be ______.
What is autonomous consumption?
Which expression represents induced consumption in the consumption function?
When income rises by ₹1, induced consumption rises by which amount?
Which formula correctly defines Marginal Propensity to Consume (MPC)?
Within which range does the value of MPC always lie?
Which formula correctly defines Marginal Propensity to Save (MPS)?
What does \[APS=\frac{S}{Y}\] measure?
What does the 45° line represent?
What does it mean when the consumption curve is above the 45° line?
