CBSE 2017 Class 12 Economics Outside Delhi Set-1

Question : 12

Total: 18

An economy is in equilibrium. From the following data, calculate the marginal propensity to save :
(a) Income =10,000
(b) Autonomous consumption =500
(c) Consumption expenditure =8,000

Solution:

Applying the equation :
c=c+‌ by ‌
Where, c= Consumption expenditure (8,000)
c= Autonomous consumption (500)
b= MPC (marginal propensity to consume)
y‌=‌ Income ‌(10,000)
8,000‌=500+b×10,000
8000‌=500+10,000b
8000−500‌=10,000b
7,500‌=10,000b
b‌=‌

7,500

10,000

b‌=0.75,MPC=0.75
Now,
MPS+MPC‌=1
MPS‌=1−MPC
‌=1−0.75=0.25
Hence, the value of MPS =0.25

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