Given that National Income is Rs 80 crore and consumption expenditure is Rs 64 crore, find out Average Propensity to Save. When income rises to Rs 100 crore and consumption expenditure to Rs 78 crore, what will be the Average Propensity to Consume and Marginal Propensity to Consume?

Here, in first condition, Y = Rs 80 crore

C = Rs 64 crore

Hence, S = Y-C = 80-64 = Rs 16 crore

Now, Average Propensity to Save,

APS = S / Y = 16 / 80 = 0.20

Again, when income and consumption expenditure rise,

Y = Rs 100 crore, C = Rs 78 crore

So, Average Propensity to Consume,

APC = C / Y =78 / 100 = 0.78

Here, ∆Y=100 - 80 = Rs 20 crore and ∆C =78 - 64 = Rs 14 crore

So, Marginal Propensity to Consume,

MPC =∆C / ∆Y = 14 / 20 = 0.70