Question

Find consumption expenditure from the following: Autonomous consumption = Rs. 100; Marginal propensity to consume = 0.70; National Income = 1,000.

Answer 1

If Autonomous consumption is Rs. 100 and MPC= 0.70, then

Consumption Function, C = 100+ 0.70 Y where Y in the income in the economy.

So at national income Rs. 1,000, consumption expenditure is

C = 100+ 0.70 ( 1,000)

= 100 + 700

= Rs. 800.