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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.

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Questions

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.

The consumption expenditure Ec of a person with income x is given by Ec = 0.0006x2 + 0.003x. Find the average propensity to consume (APC), marginal propensity to consume (MPC) when his income is ₹ 200. Also find his marginal propensity to save (MPS).

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

Find average propensity to consume, marginal propensity to consume when his income is ₹ 200. Also find his marginal propensity to save and average propensity to save.

Sum
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Solution

The expenditure Ec of a person with income x is given by 

Ec = 0.0006x2 + 0.003x 

So, marginal propensity to consume (MPC) = `(dE_c)/(dx)`

= `d/(dx)(0.0006x^2 + 0.003x)`

= 0.0006 × 2x + 0.003

= 0.0012x + 0.003

When x = 200,

MPC = (0.0012 × 200) + 0.003

= 0.24 + 0.003 = 0.243

MPS = 1 − MPC

= 1 − 0.243

= 0.757

Now APC =`E_c/x` 

= `(0.0006x^2 + 0.003x)/x`

= 0.0006x + 0.003

When x = 200

APC = 0.0006 × 200 + 0.003

= 0.12 + 0.003 = 0.123

APS = 1 − APC

= 1 − 0.123

= 0.877

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2017-2018 (March)

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