Tag: concept of consumption function

Questions Related to concept of consumption function

If income changes from 3000 to 4500 and saving changes from 600 to 900, then calculate APS?

concept of consumption function saving function and investment function economics consumption and investment functions keynesian law of consumption and propensity to consume ex ante and ex post

  1. 0.20

  2. 0.33

  3. 0.13

  4. 0.25

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Correct Option: A
Explanation:

APS $= \dfrac{Savings}{Income}$


We can calculate APS for both time period.

In the first time period, S = 600 and Y = 3000. 
APS = $\dfrac{600}{3000} = $ $0.2$

 In the second time period, S = 900 and Y = 4500. 
APS = $\dfrac{900}{4500} =$ $0.2$