Question : The consumption function is given by C = 600 + 0.8Y. If disposable income is INR 3,000, what is the level of consumption?
Option 1: INR 1,800
Option 2: INR 3000
Option 3: INR 4,200
Option 4: INR 4,800
Answer (1)
21st Jan, 2024
Correct Answer:
INR 3000
Solution : The correct answer is (B) INR 3000
To find the level of consumption, we can substitute the given value of disposable income (Y) into the consumption function.
Given: C = 600 + 0.8Y
Disposable income (Y) = INR 3,000
Substituting the value of Y into the consumption function, we get:
C = 600 + 0.8 * 3000
C = 600 + 2400
C = 3000
Therefore, the level of consumption is INR 3,000.
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