Macro

Income & Employment

Medium

Comprehension:

Read the passage carefully and answer the questions based on the passage:

Calculate various parameters of Aggregate Demand, Aggregate Supply and related concepts

Income (in ₹ Crore)	Consumption (in ₹ Crore)
0	50
50	75
100	100
200	150
300	200
400	250

When income is less than consumption, value of Average Propensity to Consume (APC) is.

More than 1.

Less than 1.

Less than zero.

Equal to zero.

✅ Correct Option: 1

Option 1 -> When consumption exceeds income, APC = C/Y results in a value greater than 1.

Option 2 -> This occurs when income exceeds consumption, resulting in APC < 1.

Option 3 -> APC cannot be negative as both consumption and income are positive values.

Option 4 -> APC equals zero only when consumption is zero, which is unrealistic.

Hence, Option 1: More than 1 -> Average Propensity to Consume (APC) is calculated as Consumption/Income. When income is less than consumption (C > Y), the numerator becomes larger than the denominator, making APC > 1. This situation occurs during dissaving, where individuals spend more than their current income by either using past savings or borrowing. For example, if consumption is ₹1200 and income is ₹1000, then APC = 1200/1000 = 1.2, which is greater than 1 -> correct

Question 46

When income is more than consumption, then value of Average Propensity to Save (APS) is.

Question 48

From the given table, identify the level of income, where Average Propensity to Save (APS) becomes zero:

Question 49

_____________ is the minimum level of consumption done at zero income level and is independent of income.

Question 50

Calculate Marginal Propensity to Save (MPS) and Average Propensity to Consume (APC) at income level of 200.

When income is less than consumption, value of Average Propensity to Consume (APC) is.

Solution

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