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Determination Of Income And Employment

Question
CBSEENEC12013007
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Write notes on the following:
Relationship between APC and APS. Can the value of APS be negative? If yes, when?

Solution
Relationship between APC and APS.
The sum of APC and APS is always equal to unity (1), i.e., APC + APS = 1. It is so, because income is either consumed or saved.
Again the relationship can be stated in the following way also:
APC = 1 – APS
APS = 1 – APC
Apparently if one is given, the other can be worked out.
The value of APS can be negative when consumption expenditure becomes higher than income. For example, if income is र 1,000 and consumption expenditure is र 1,200, then saving is -200 (i.e., dissaving).
Then    APS space equals space fraction numerator negative 200 over denominator 1000 end fraction space equals space fraction numerator negative 1 over denominator 5 end fraction space equals space minus 0.2

Some More Questions From Determination of Income and Employment Chapter

State relationship between income and consumption.

What is Breakeven point?

What are the types of Propensity to consume?

How does MPC affect level of income?

Distinguish between APC and MPC, The value of which of APC and MPC can be greater than one and when?

State relationship between income and saving.

What is saving function (or Propensity to save)?

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