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From the following data, calculate the: a) Consumption Expenditure and b) Investment S. No. Particulars Amount (in Rs.) 1. Equilibrium level of income 5,000 2. Autonomous consumption 500 3. Marginal Propensity to Save 0.4

Posted by Hannan Naqvi 4 years ago

CBSE > Class 12 > Economics

1 answers

Prince Chaurasiya 4 years ago

Answer (i) Consumption Function, C = 500+ 0.4 Y where Y in the income in the economy. At equilibrium, AS=AD Y= C+I => 5,000 = 500 + 0.4 (5,000) + I => 5,000 = 500 + 2,000+ I => 5,000 = 2,500 + I => I = 5,000- 2,500 = 2,500. (ii) Consumption Function, C = 500 + 0.4 Y where Y in the income in the economy. So at national income 5,000 , consumption expenditure is C = 500+ 0.4 ( 5,000) = 500 + 2,000 = 2,500

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