Question

\[ \begin{array}{|l|l|l|l|} \hline \textbf{Income} & \textbf{Savings} & \textbf{(APC)} & \textbf{(MPS)} \\ \hline 0 & (-)30 & - & - \\ \hline 100 & 20 & 1 & 0.3 \\ \hline 200 & 50 & 0.85 & 0.3 \\ \hline 300 & 80 & 0.8 & 0.3 \\ \hline \end{array} \]

Hint:

APC and MPS help analyze consumption and savings behavior as income changes. Use the formulas systematically for calculations.

Answer 1

The Average Propensity to Consume (APC) is defined as: \[ APC = \frac{ {Consumption (C)}}{ {Income (Y)}} = \frac{Y - {Savings (S)}}{Y} \]. The Marginal Propensity to Save (MPS) is defined as: \[ MPS = \frac{\Delta S}{\Delta Y} \]. - When \( Y = 100 \): \( APC = \frac{100 - 20}{100} = 1 \), \( MPS = \frac{20 - (-30)}{100} = 0.3 \).
- When \( Y = 200 \): \( APC = \frac{200 - 50}{200} = 0.85 \), \( MPS = \frac{50 - 20}{100} = 0.3 \). 
- When \( Y = 300 \): \( APC = \frac{300 - 80}{300} = 0.8 \), \( MPS = \frac{80 - 50}{100} = 0.3 \).