Question

The consumption expenditure $E_c$ of a person with the income x, is given by $E_c=0.0006x^2+0.003x$. Find MPC, MPS, APC and APS when the income $x=200.$

Answer 1

The expenditure $E_c$ of a person with income $x$ is given by
$E_c=\left[0.0006\right]x^2+\left[0.003\right]x$
So, the maginally propensity to consume $\left(MPC\right)=\frac{d{E}_c}{dx}$
Therefore,
$MPC=0.0012x+0.003$
Therefore, $MPC$ at $x=200$ is
$=0.0012\left(200\right)+0.003$
$=0.24+0.003$
$=0.243$
As $MPC+MPS=1$
$MPS=1-MPC$
$MPS=1-0.243$
$MPS=0.757$
Now,
$APC=\frac{E_c}{x}$
$=0.0006x+0.003$
At $x=200$
$APC=0.0006\times 200+0.003$
$=0.123$
As $APS=1-APC$
$=1-0.123$
$=0.877$
Hence, this is the answer.