Question

Find MPC (Marginal Propensity to Consume) and APC(Average Propensity to Consume) if the expenditure $E_c$ of a person with income $I$ is given as $E_c=\left(0.0003\right)I^2+\left(0.075\right)I$ when $I=1000$.

Answer 1

The expenditure $E_c$ of a person with income $I$ is given by
$E_c=\left[0.0003\right]I^2+\left[0.075\right]$
So, the maginally propensity to consume $\left(MPC\right)=\frac{d{E}_c}{dI}$
Therefore,
$MPC=0.0006I$
Therefore,
$MPC$ at $I=1000$ is
$=0.0006\left(1000\right)$
$=0.6$
Now,
$APC=\frac{E_c}{I}$
$=0.0003I+\frac{0.075}{I}$
At $I=1000$
$APC=0.0003\times 1000+\frac{0.075}{1000}$
$=0.3+0.000075$
$=0.300075$
Hence, this is the answer.