The autonomous consumption of an individual is Rs.500 and his personal disposable income is Rs. 5000. If his marginal propensity to consume is 0.8, find out the level of aggregate consumption.

Kapil
Latest Answer: 1 week ago
In: Commerce

The autonomous consumption of an individual is Rs.500 and his personal disposable income is Rs. 5000. If his marginal propensity to consume is 0.8, find out the level of aggregate consumption.

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1 Answers

Answered By Nikita Chetry
Answer: 1 week ago

The consumption function is: C=Autonomous Consumption+(MPC×Disposable Income)C = \text{Autonomous Consumption} + (\text{MPC} \times \text{Disposable Income}) Given: Autonomous Consumption...

The consumption function is:

$C = \text{Autonomous Consumption} + (\text{MPC} \times \text{Disposable Income})$

Given: Autonomous Consumption = ₹500, MPC = 0.8, Disposable Income = ₹5,000

Step 1: Consumption from income = 0.8 × 5,000 = ₹4,000
Step 2: Aggregate consumption = 500 + 4,000 = ₹4,500

Answer: Aggregate consumption = ₹4,500

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