The break-even level of income for an economy is given to be ₹ 5000 crore. If the economy saves 50 percent of additional income, calculate the value of autonomous consumption.
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Given, MPS = 0.5(as 50% of additional income is saved)
MPC or b = 1 - MPS = 1 - 0.5 = 0.5
Consumption (C) = Income (Y) at Break-even level of income.
So, Consumption (C) = 5000,
Consumption function is expressed as: $\text{C}=\bar{\text{C}}+\text{b}(\text{Y}),$
Putting the values of C, b and Y, we get; $5,000=\bar{\text{C}}+0.5(5,000)$
Autonomous consumption $(\bar{\text{C}})=₹\ 2,500\ \text{crore}.$
MPC or b = 1 - MPS = 1 - 0.5 = 0.5
Consumption (C) = Income (Y) at Break-even level of income.
So, Consumption (C) = 5000,
Consumption function is expressed as: $\text{C}=\bar{\text{C}}+\text{b}(\text{Y}),$
Putting the values of C, b and Y, we get; $5,000=\bar{\text{C}}+0.5(5,000)$
Autonomous consumption $(\bar{\text{C}})=₹\ 2,500\ \text{crore}.$
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