Q. 17

# The consumption f

APC=C/Y

C=consumption

Y=Income

Given: Equilibrium Income

C = 40 + 0.8 Y

Given APC=1

• 1=40+0.8Y/Y

• Y=40+0.8Y

• 0.2Y=40

• Y=200

So when income is 200, APC will be 1.

OR

Average propensity to save(APS) is the ratio of saving to the level of saving income. It can never be 1 or more than 1 because savings can never be equal or more than the national income. However, APS can be negative or less than 1 because when income levels are lower people will consume less.

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