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Question
Give reason or explain the following statement
Demand for necessary goods is inelastic.
Solution
When consumers buy about the same amount of commodity whether the price drops or falls, then the demand is called inelastic demand. For example demand for petrol for a cab driver is inelastic. Thus the demand for a commodity depends on the nature of Commodities, Commodities may be either necessaries or, luxuries. Normally, elasticity of demand for necessaries is inelastic and for luxurious demand tends to the elastic.
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RELATED QUESTIONS
Distinguish between marginal propensity to consume and average propensity to consume. Give a numerical example.
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An economy is in equilibrium. Calculate national income from the following :
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Complete the following table:
|
Consumption expenditure (Rs) |
Savings (Rs) |
Income (Rs) |
Marginal propensity to Consume |
|
100 |
50 |
150 |
|
|
175 |
75 |
……. |
…… |
|
250 |
100 |
……. |
…… |
|
325 |
125 |
……. |
…… |
Define or explain the following concept.
Autonomous Consumption.
Define or explain the concept Average propensity to save .
Fill in the blank with appropriate alternatives given in the bracket:
The part of income not spent is________.
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 |
|
|
(6) | Inelastic demand | |
|
|
|
(7) | Luxurious commodities |
|
|
|
(8) | Dr. Marshall |
Answer in brief.
Explain the relationship between Income and Consumption.
Choose the correct answer :
When income increases consumption and saving will _________.
Distinguish between Average propensity to consume and Marginal propensity to consume.
Write short note on:
Paradox of value
Answer the following question.
State the objective factors determining consumption function.
An economy is in equilibrium. From the following data calculate investment expenditure :
(i) Marginal propensity to consume = 0·9
(ii) Autonomous consumption = 200
(iii) Level of income = 10000
If in an economy :
Change in initial Investment (∆I) = ₹ 700 crores
Marginal Propensity to Save (MPS) = 0.2
(a) Investment Multiplier (k)
(b) Change in final income (∆Y)
Calculate the change in final income, if Marginal Propensity to Consume (MPC) is 0.8 and change in initial investment is ₹ 1,000 crores.
If the income is ₹ 400 crores and consumption is ₹ 250 crores, what will be the APC?
MPC = MPS = ?
Which one is correct?
The relation between consumption and savings are ______
______ buy goods and services for consumption and also supply factors of production.
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?
The sum of MPC and MPS is always equal to _____
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
What is "MPS" or the 'marginal propensity' to save?
Why public goods must be provided by the government?
Identify the correct pair of from the following Columns I and II:
| Columns I | Columns II |
| 1. Total Product increases at an increasing rate and Marginal Product rises till it reaches its maximum point. | (a) Second Stage |
| 2. Total product increases at a decreasing rate and reaches maximum, and MP becomes zero. | (b) First Stage |
| 3. Total product also decreases and marginal product (MP) becomes negative. | (c) Third Stage |
| 4. Improvement in technique of production and discovery of fixed factor substitute can postpone the operation of law for some time. | (d) Fourth Stage |
What is saving per Income called?
If the value of Average Propensity to Save (APS) is 0.2 and National Income is ₹4,000 crores, then consumption will be ______
When we add up utility derived from consumption of all the units of the commodities, we get:
Which of the following statements is not correct?
The marginal physical product of a factor must be ______ when the total physical product is falling.
Identify the correctly matched pair from Column A to that of Column B:
| Column A | Column B | ||
| (1) | MPC | (a) | Ratio of Savings to Consumption |
| (2) | APC | (b) | Ratio of Consumption to Income |
| (3) | APS | (c) | Ratio of Consumption to Savings |
| (4) | MPS | (d) | Ratio of Savings to Investment |
Income rises from ₹50,000 to ₹60,000, consumption increases from ₹40,000 to ₹48,000. In this situation, what will be the value of Marginal Propensity to Consume (MPC)?
Identify the correctly matched pair from Column A to column B:
| Column A | Column B |
| (1) MPC = 0 | (a) K > 1 |
| (2) MPC = 1 | (b) K = Infinity |
| (3) MPC < 1 | (c) K = 0 |
| (4) MPC > MPS | (d) K < 1 |
In an economy 75 percent of the increase in income is spent on consumption. Investment increased by ₹ 1,000 crore.
Calculate the total increase in income on the basis of given information.
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.
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.
When National Income rises from ₹ 600 Cr. to ₹ 1000 Cr., the consumption expenditure increases from ₹ 500 Cr. to ₹ 800 Cr. Calculate MPC and hence the value of Investment Multiplier.
