Question
Differentiate between APC and MPC.
| S.No. | APC | Basis | MPC |
| 1. | It is the ratio of consumption expenditure to the corresponding level of income (Y) at a point of time. | Meaning | It is the ratio of change in consumtion expenditure $(\Delta\text{C)}$ to change in income $(\Delta\text{Y)}$ over a period of time. |
| 2. | APS can be more than one as long as consumption is more than national incomem, i.e., till the break-even point. | Value more than one | MPC cannot be more than one as change in consumption cannot be more than change in income. |
| 3. | When income increases APC fails but at a rate of less than that of MPC. | Response to change in income | When income increases MPC also falls but at a rate of more than that of APC. |
| 4. | $\text{APC}=\frac{\text{C}}{\text{Y}}$ | Formula | $\text{MPC}=\frac{\Delta\text{C}}{\Delta\text{Y}}$ |
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| Output (Units) | 1 | 2 | 4 |
| Average Total Cost (₹) | 80 | 48 | 40 |
OR
A consumer consumes good X. Explain the effect of fall in the price of related goods on the demand of X. Use diagrams.| Total Output (Units) | Total Cost (Rs) |
| 0 | 120 |
| 1 | 180 |
| 2 | 200 |
| 3 | 210 |
| 4 | 230 |
| 5 | 270 |
| 6 | 360 |