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NextQ141

Choose the correct consumption function from the options given below with reference to the illustrated given diagram. If the value of Marginal Propensity to Consume (MPC) is 0.6 and dissavings are 100, the relevant saving function would be : (Choose the correct option)

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Question 140

"Under a study, examining the spending habits of a hypothetical economy, it was observed that even households with zero income managed to consume basic necessities. As the income of people increased, their consumption also increased, but not as rapidly as income." Based on the given text and common understanding, answer the following questions : (i) Identify and elaborate the type of consumption indicated in the first para of the above text. (ii) Explain, the reason behind the positive slope of Aggregate Demand Curve. Income of an economy increased from Rs. 50,000 to Rs. 1,00,000 crore. Savings of the economy increased from Rs. 5,000 crore to Rs. 20,000 crore. (i) Calculate Average Propensity to Consume (APC) and Average Propensity to Save (APS) before and after the rise in Income. (ii) Draw appropriate conclusion regarding the behaviour of Average Propensity to Save (APS) as his income increases.

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