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Question
Find MPC, MPS, APC and APS, if the expenditure Ec of a person with income I is given as Ec = (0.0003) I2 + (0.075) I ; When I = 1000.
Solution
Given, Ec = (0.0003) I2 + (0.075) I
∴ MPC = `(dE_c)/(dI) = (0.0003)(2I) + 0.075`
∴ MPC = 0.0006 I + 0.075
I = 1000 ...[Given]
∴ MPC = 0.0006(1000) + 0.075
= 0.6 + 0.075
∴ MPC = 0.675
Since MPC + MPS = 1,
0.675 + MPS = 1
∴ MPS = 1 - 0.675
∴ MPS = 0.325
Now, APC = `E_c/I`
= `((0.0003)I^2 + (0.075)I)/I`
= `(I(0.0003I + 0.075))/I`
∴ APC = 0.0003 I + 0.075
I = 1000 ...[Given]
∴ APC = 0.0003(1000) + 0.075
= 0.3 + 0.075
∴ APC = 0.375
Also, APC + APS = 1
∴ 0.375 + APS = 1
∴ APS = 1 – 0.375
∴ APS = 0.625
∴ For I = 1000,
MPC = 0.675, MPS = 0.325
APC = 0.375, APS = 0.625
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when I = 1000
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