Question

With reference to the given diagram, which of the following is true at point B?

Options

• Slope of Consumption Curve = 0

• Average Propensity to Consume = 0

• Slope of Saving Curve = 1

• Average Propensity to Consume = 1

Answer 1

Average Propensity to Consume = 1

Explanation:

At point B, consumption and income are exactly equal. There is no saving or dissaving at this point; therefore, the Average Propensity to Consume (APC) = 1. Every unit of income earned is completely spent on consumption, showing a perfect balance of income and expenditure.