Question : The average propensity to consume (APC) is 0.6. If disposable income is INR 5,000, what is the level of consumption?
Option 1: INR 2,500
Option 2: INR 3,000
Option 3: INR 6,000
Option 4: INR 8,333.33
Answer (1)
18th Jan, 2024
Correct Answer:
INR 3,000
Solution : The correct answer is (B). INR 3,000.
The average propensity to consume (APC) is the proportion of disposable income that is consumed. It is calculated by dividing consumption by disposable income. In this case, the APC is 0.6, which means that 60% of disposable income is consumed. If disposable income is INR 5,000, then consumption is 0.6 * INR 5,000 = INR 3,000.
Therefore, the level of consumption is INR 3,000.
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