For Solving the Questions, we need to Remember following formulas
Income = Consumption + Savings
Y = C + S
MPC = Change in Consumption/ Change in Income
MPC = Delta C/Delta Y
MPS = Change in Savings/ Change in Income
MPS = Delta S/Delta Y
Example 4
Calculate MPC from the following schedule:
Income (Y) | 0 | 100 | 200 | 300 | 400 |
Consumption (C) | 60 | 110 | 150 | 180 | 200 |
Income (Y) | 0 | 100 | 200 | 300 | 400 |
Consumption (C) | 60 | 110 | 150 | 180 | 200 |
Change in Y (Delta Y) | - | 100 | 100 | 100 | 100 |
Change in C (Delta C) | - | 50 | 40 | 30 | 20 |
MPC | - | 0.5 | 0.4 | 0.3 | 0.2 |
Example 5
The level of income, in an economy, increases from ₹ 20,000 crores to ₹ 70,000 crores, and as a result the level of consumption increases from ₹ 15,000 crores to ₹ 45,000 crores.
Calculate the MPC.
Income increases from 20,000 to 70,000
Level of consumption increases from 15,000 to 45,000
Calculate MPC.
View Answer
Income (Y) 20000
Consumption (C) 15000
Change in Y (Delta Y) 50000
Change in C (Delta C) 30000
MPC = Change in C/ Change in Y
30,000/ 50000
0.6
Example 6
Calculate the value of MPS from the given table:
Income | 100 | 200 | 300 | 400 | 500 |
Savings | 15 | 40 | 70 | 110 | 160 |
Calculate MPS
View AnswerIncome (Y) | 0 | 100 | 200 | 300 | 400 |
Savings (S) | 15 | 40 | 70 | 110 | 160 |
Change in Y (Delta Y) | - | 100 | 100 | 100 | 100 |
Change in S (Delta S) | - | 25 | 30 | 40 | 50 |
MPS | - | 0.25 | 0.3 | 0.4 | 0.5 |
Example 3(v)
When income rises from ₹ 1,000 to ₹ 1,100, saving rise by ₹ 30. Find out MPS and MPC.
Income rises from Rs1000 to Rs1,100
Savings rise by Rs 30.
Calculate MPC and MPS
View Answer
Change in Income 100
Change in Savings 30
MPC = Change in S/ Change in Y
30/100
MPS = 0.3
MPS + MPC = 1
0.3 + MPC = 1
MPC = 0.7
Example 7
Complete the following table:
Level of Income (₹) | 400 | 500 | 600 | 700 |
Consumption Expenditure (R) | 240 | 320 | 395 | 465 |
MPC | - | - | - | - |
MPS | - | - | - | - |
In this question, we are given Income (Y) as well as Consumption Expenditure (C )
We need to calculate MPC and MPS
For this we will do following steps
Step 1 Calculate Savings (Income - Consumption Exp)
Step 2 Calculate increase in Consumption, Increase in Savings and Income
Step 3 Calculate MPC and MPS
View AnswerFormat
Income (Y) | 400 | 500 | 600 | 700 |
Consumption Expenditure | 240 | 320 | 395 | 465 |
Savings | 160 | 180 | 205 | 235 |
Increase in Income (Delta Y) | - | 100 | 100 | 100 |
Increase in Consumption Exp (Delta C) | - | 80 | 75 | 70 |
Increase in Savings (Delta S) | - | 20 | 25 | 30 |
MPC (Delta C/Delta Y) | - | 0.8 | 0.75 | 0.7 |
MPS (Delta S/Delta Y) | - | 0.2 | 0.25 | 0.3 |
Example 8
Complete the following table:
Income | Saving | Marginal Propensity to Consume | Average Propensity to Save |
0 | - 12 | - | - |
20 | - 6 | - | - |
40 | 0 | - | - |
60 | 6 | - | - |
In this question, we are given Income (Y) as well as Savings (S )
We need to calculate MPC and APS
For this we will do following steps
Step 1 Calculate Consumption (Income - Savings = Consumption)
Step 2 Calculate increase in Consumption and Increase in Income (increase in Savings not required)
Step 3 Calculate MPC (Increase in Consumption/ Increase in Income)
Step 4 Calculate APS (Savings/ Income)
View AnswerIncome (Y) | Savings | Consumption Exp | Increase in Income (Delta Y) | Increase in Consumption Exp (Delta C) | MPC (Delta C/ Delta Y) | APS (S/Y) |
0 | -12 | 12 | - | - | - | - |
20 | -6 | 26 | 20 | 14 | 0.7 | -0.3 |
40 | 0 | 40 | 20 | 14 | 0.7 | 0 |
60 | 6 | 54 | 20 | 14 | 0.7 | 0.1 |
Example 9
Complete the following table:
Income | Consumption | Marginal Propensity to Save | Average Propensity to Save |
0 | 40 | - | - |
50 | 70 | - | - |
100 | 100 | - | - |
150 | 120 | - | - |
In this question, we are given Income (Y) as well as Consumption (C)
We need to calculate MPS and APS
For this we will do following steps
Step 1 Calculate Savings (Income - Consumption = Savings)
Step 2 Calculate increase in Savings and Increase in Income (increase in Consumption not required)
Step 3 Calculate MPS (Increase in Savings/ Increase in Income)
Step 4 Calculate APS (Savings/ Income)
Income (Y) | Consumption | Savings | Increase in Income (Delta Y) | Increase in Savings Exp (Delta S) | MPS (Delta S/ Delta Y) | APS (S/Y) |
0 | 40 | -40 | - | - | - | - |
50 | 70 | -20 | 50 | 20 | 0.4 | -0.4 |
100 | 100 | 0 | 50 | 20 | 0.4 | 0 |
150 | 120 | 30 | 50 | 30 | 0.6 | 0.2 |
Example 11
From the following schedule, compute APC, APS, MPC and MPS:
Income (₹) | 50 | 100 | 150 | 200 |
Saving (₹) | 10 | 40 | 75 | 120 |
In this question, we are given Income (Y) as well as Savings (S )
We need to calculate MPC, APC, MPS and APS
For this we will do following steps
Step 1 Calculate Consumption (Income - Savings = Consumption)
Step 2 Calculate increase in Consumption, Increase in Income and increase in Savings
Step 3 Calculate MPC (Increase in Consumption/ Increase in Income)
Step 4 Calculate MPS (Increase in Savings/ Increase in Income)
Step 5 Calculate APC (Consumption/ Income)
Step 6 Calculate APS (Savings/ Income)
Income (Y) | Savings | Consumption | Increase in Income (Delta Y) | Increase in Savings Exp (Delta S) | Increase in Consumption Exp (Delta C) | MPS (Delta S/ Delta Y) | APS (S/Y) | MPC (Delta C/ Delta Y) | APC (C/Y) |
50 | 10 | 40 | - | - | - | - | - | - | - |
100 | 40 | 60 | 50 | 30 | 20 | 0.6 | 0.4 | 0.4 | 0.6 |
150 | 75 | 75 | 50 | 35 | 15 | 0.7 | 0.5 | 0.3 | 0.5 |
200 | 120 | 80 | 50 | 45 | 5 | 0.9 | 0.6 | 0.1 | 0.4 |
Example 12 Part 1
In this question, We are given 2 sets of Income (Y) and Consumption Expenditure (C )
We need to do following Steps
Step 1 Calculate Savings (Savings = Income - Consumption Exp (S = Y - C)
Step 2 Calculate Change in Income, Savings and Consumption Exp
Step 3 Calculate APS
Income (Y) | Consumption Exp (C ) | Savings (S) | APS (S/Y) |
80 | 64 | 16 | 0.2 |
100 | 78 | 22 |
Example 12 Part 1
In this question, We are given Income (Y) and Consumption Expenditure (C )
We need to calculate APS
Step 1 Calculate Savings (Savings = Income - Consumption Exp (S=Y-C)
Savings + Consumption = Income
1. Savings + 64 = 80
Savings = 16
Step 2 Calculate APS = Savings/ Income = S/I
APS = Savings/ Income
APS = 16/80
APS = 0.2
Example 12 Part 2
In this question, We are given Income (Y) and Consumption Expenditure (C )
We need to calculate APC and MPC
For this, we need to calculate Increase in Consumption and Increase in Income
Income (Y) | Consumption Exp (C ) | Savings (S) | APS (S/Y) | APC (C/Y) | Increase in Income (Delta Y) | Increase in Consumption Exp (Delta C) | MPC (Delta C/Delta Y) |
80 | 64 | 16 | 0.2 | - | - | - | |
100 | 78 | 22 | 0.78 | 20 | 14 | 0.7 |
Example 10
Complete the following table:
Income | MPC | Savings | APS |
0 | - | -90 | - |
100 | 0.6 | ? | ? |
200 | 0.6 | ? | ? |
300 | 0.6 | ? | ? |
Income | MPC | Savings | APS | Consumption | Change in Consumption | Change in Income |
0 | - | -90 | - | 90 | - | - |
100 | 0.6 | -50 | -0.5 | 150 | 60 | 100 |
200 | 0.6 | -10 | -0.05 | 210 | 60 | 100 |
300 | 0.6 | 30 | 0.1 | 270 | 60 | 100 |
NCERT Questions
No questions in this part
Other Books
Question 1
If MPS is 0.3 and the income increases from Rs 6,000 crores to 9,000 crores, what will be the additional consumption in the economy?
View AnswerMPS = 0.3
Change in Income = 3000
Change in Consumption = ?
MPS + MPC = 1
0.3 + MPC = 1
MPC = 0.7
MPC = Change in Consumption/ Change in Income
0.7 = Change in Consumption/ 3000
2100 = Change in Consumption
Question 2
If national income is Rs 90 crore, Consumption Expenditure is Rs 81 crore,
find out average propensity to save. When income rises to Rs 100 crore
and consumption expenditure to Rs 88 crore. What will be the marginal
propensity to consume and marginal propensity to save.
View Answer1) Y = 90
C = 81
APS = ?
Y = C + S
90 = 81 + S
S = 9
APS = S/ Y
APS = 9/90
APS = 0.1
2) Y = 100
C = 88
Change in Y = 10
Change in C = 7
MPC = ?
MPS = ?
MPC = Change in C/ Change in Y
MPC = 7/10
MPC = 0.7
Y = C + S
100 = 88 + S
S = 12
Change in = 3
MPS = Change in S/ Change in Y
MPS = 3/10
MPS = 0.3
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