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Question
Distinguish between :
Propensity to consume and Propensity to save.
Solution
| Basis of Difference | Propensity to consume | Propensity to save |
| Also known as | Consumption function | Savings function |
| Defines | Relationship between income and consumption | Relationship between income and saving |
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RELATED QUESTIONS
Distinguish between marginal propensity to consume and average propensity to consume. Give a numerical example.
Define marginal propensity to consume
Find equilibrium national income:
Autonomous consumption expenditure = 120
Marginal propensity to consume = 0.9
Investment expenditure = 1100
Suppose marginal propensity to consume is 0.8. How much increase in investment is required to increase national income by Rs. 2000 crore? Calculate.
Assuming that increase in investment is Rs1000 crore and marginal propensity to consume is 0.9, explain the working of the multiplier.
If the marginal propensity to consume is greater than marginal propensity to save, the value of the multiplier will be (Choose the correct alternative)
(a) greater than 2
(b) less than 2
(c) equal to 2
(d) equal to 5
An economy is in equilibrium. From the following data, calculate the marginal propensity to save:
1) Income = 10,000
2) Autonomous consumption = 500
3) Consumption expenditure = 8,000
An economy is in equilibrium. Calculate the National Income from the following :
Autonomous Consumption = 120
Marginal Propensity to Save = 0.2
Investment Expenditure = 150
An economy is in equilibrium. Calculate Autonomous Consumption from the following :
National Income = 1,250
Marginal Propensity to Save = 0.2
Investment Expenditure = 150
Calculate Marginal Propensity to Consume from the following data about an economy
Which is an equilibrium:
National income = 2000
Autonomous Consumption expenditure = 200
Investment expenditure = 100
An economy is in equilibrium. Find the Investment Expenditure from the following :
National Income = 750
Autonomous Consumption = 200
Marginal Propensity to Save = 0.4
An economy is in equilibrium. Calculate Marginal Propensity to Save from the following :
National Income = 1,000
Autonomous Consumption = 100
Investment Expenditure = 200
Match the following Group ‘A’ with Group ‘B’:
| Group ‘A’ | Group ‘B’ | ||
| (a) | Giffen’s goods | (1) | Uses of commodities |
| (b) | Essential commodities | (2) | Keynes |
| (c) | Consumption | (3) | Primary function of bank |
| (d) | Consumption function | (4) | Inferior goods |
| (e) | Accept deposits | (5) | Money lender |
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(6) | Inelastic demand | |
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(7) | Luxurious commodities |
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(8) | Dr. Marshall |
Explain the following concepts or give definitions.
Consumption
Define 'or' explain the following concept.
Propensity to save
Answer the following question.
What is meant by a propensity to consume?
Answer the following question.
What is meant by autonomous consumption? Explain with the help of a diagram.
Suppose in a hypothetical economy, the income rises from ₹ 5,000 crores to ₹ 6,000 crores. As a result, the consumption expenditure rises from ₹ 4,000 crores to ₹ 4,600 crores. Marginal propensity to consume in such a case would be __________.
Answer the following question.
Which of the two, average propensity to consume or average propensity to save, can be negative, and why?
MPC = MPS = ?
Which one is correct?
Calculate equilibrium level of income for a hypothetical economy, for which it is given that:
- Autonomous Investments = ₹ 500 crores, and
- Consumption function, C = 100 + 0.80Y
______ buy goods and services for consumption and also supply factors of production.
A firm is able to sell any quantity of a good at a given price. The firm's Marginal Revenue will be ______
If MPC is less than one, it follows that ______
Marginal Propensity to Save is equal to ______
Which of the following points are related to The sum of MPC and MPS is always equal to autonomous investments?
Which of the following points are related with marginal propensity to consume?
Which of the following points establish the relationship between MPS and MPC?
If MPC is 0.9, what is the value of the multiplier? How much investment is needed to increase national income by Rs 5,000 Crores
The simplest consumption function assumes ______
What is saving per Income called?
When we add up utility derived from consumption of all the units of the commodities, we get:
If the value of Average Propensity to Consume (APC) is 0.8 and National Income is ₹4,000 crores, the value of savings will be ______.
Average Propensity to Consume is equal to:
Which of the following statements is not correct?
If increase in National Income is equal to increase in consumption, identity the value of Marginal Propensity to Save:
Assertion (A): Saving curve makes a negative intercept on the vertical axis at zero level of income.
Reason (R): Saving function refers to the functional relationship between saving and income.
Assertion (A): At the break-even level of income, the value of Average Propensity to Consume (APC) is zero.
Reason (R): Sum of Average Propensity to Consume (APC) and Average Propensity to Save (APS) is always equal to one.
The value of ______ can be greater than one.
If increase in National Income is equal to increase in Savings, the value of Marginal Propensity to Consume would be ______.
Complete the following table:
| INCOME (Y) |
SAVING (S) |
APC |
| 0 | (-) 12 | |
| 20 | 6 |
How is APS obtained from the APC?
What is meant by autonomous consumption expenditure? Show it on a diagram.
