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If income is Rs 1000 and consumption expenditure is Rs 200, APS will be
  • a)
    -0.8
  • b)
    0.2
  • c)
    0.8
  • d)
    -0.2
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
If income is Rs 1000 and consumption expenditure is Rs 200, APS will b...
Explanation:

To calculate the Average Propensity to Save (APS), we need to first understand the concept of APS and then use the given information to calculate it.

Concept of Average Propensity to Save (APS):
Average Propensity to Save (APS) is the proportion of income that an individual or a household saves out of their total income. It is calculated by dividing the saving (S) by the total income (Y).

Formula for Average Propensity to Save (APS):
APS = S / Y

Where:
APS = Average Propensity to Save
S = Saving
Y = Total Income

Given Information:
Income (Y) = Rs 1000
Consumption Expenditure (C) = Rs 200

Calculating Saving (S):
Saving (S) can be calculated by subtracting the consumption expenditure (C) from the total income (Y).

S = Y - C
S = 1000 - 200
S = 800

Calculating Average Propensity to Save (APS):
Using the formula for APS, we can now calculate it by dividing the saving (S) by the total income (Y).

APS = S / Y
APS = 800 / 1000
APS = 0.8

Therefore, the Average Propensity to Save (APS) is 0.8.

Conclusion:
The correct answer is option 'c' - 0.8.
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Community Answer
If income is Rs 1000 and consumption expenditure is Rs 200, APS will b...
Total saving=income-consumption=1000-200=800
APS=s/y
=800/1000
hence,APS=0.8
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In a poor country like India, as income rises people first concentrate on increasing their consumption of what they regard as basic or more essential consumer goods. For the poor, these goods would primarily include cereals and for people at successive levels of higher income protective foods, simple non-food consumer goods, more modern, better quality non-food consumer goods and simple consumer durables, better quality consumer goods, and so on. When the demand for basic and more essential consumer goods is more or less met, demand for the next higher level of consumer goods begins to impinge on consumer decision making and their consumption increases. There is thus a hierarchy of income levels and a hierarchy of consumer goods. As incomes rise and one approaches the turning point referred to, there is an upward movement along the hierarchy in the demand for consumer goods which exhibits itself in a relative increase in the demand for these goods. If one examines the past consumption behaviour of households in India, one finds confirmation of the proposition just made. Until the mid seventies one notices a rise in the proportion of consumption expenditure on cereals, and thereafter, a steady decline reflecting a progressive increase in the relative expenditure on non-cereal or protective foods. About the same time the rising trend in the share of food in total consumption expenditure also begins to decline, raising the proportion of expenditure on non-food consumer goods. Simultaneously one also notices a sharper rise in the proportion of expenditure on consumer durables. Thus, what one sees is an upward movement in consumer demand along the hierarchy of consumer goods which amounts to a major change in consumer behaviour.Prices of protective food have risen because

In a poor country like India, as income rises people first concentrate on increasing their consumption of what they regard as basic or more essential consumer goods. For the poor, these goods would primarily include cereals and for people at successive levels of higher income protective foods, simple non-food consumer goods, more modern, better quality non-food consumer goods and simple consumer durables, better quality consumer goods, and so on. When the demand for basic and more essential consumer goods is more or less met, demand for the next higher level of consumer goods begins to impinge on consumer decision making and their consumption increases. There is thus a hierarchy of income levels and a hierarchy of consumer goods. As incomes rise and one approaches the turning point referred to, there is an upward movement along the hierarchy in the demand for consumer goods which exhibits itself in a relative increase in the demand for these goods. If one examines the past consumption behaviour of households in India, one finds confirmation of the proposition just made. Until the mid seventies one notices a rise in the proportion of consumption expenditure on cereals, and thereafter, a steady decline reflecting a progressive increase in the relative expenditure on non-cereal or protective foods. About the same time the rising trend in the share of food in total consumption expenditure also begins to decline, raising the proportion of expenditure on non-food consumer goods. Simultaneously one also notices a sharper rise in the proportion of expenditure on consumer durables. Thus, what one sees is an upward movement in consumer demand along the hierarchy of consumer goods which amounts to a major change in consumer behaviour.Whenever there is a decline in the proportion of consumption expenditure on cereals

In a poor country like India, as income rises people first concentrate on increasing their consumption of what they regard as basic or more essential consumer goods. For the poor, these goods would primarily include cereals and for people at successive levels of higher income protective foods, simple non-food consumer goods, more modern, better quality non-food consumer goods and simple consumer durables, better quality consumer goods, and so on. When the demand for basic and more essential consumer goods is more or less met, demand for the next higher level of consumer goods begins to impinge on consumer decision making and their consumption increases. There is thus a hierarchy of income levels and a hierarchy of consumer goods. As incomes rise and one approaches the turning point referred to, there is an upward movement along the hierarchy in the demand for consumer goods which exhibits itself in a relative increase in the demand for these goods. If one examines the past consumption behaviour of households in India, one finds confirmation of the proposition just made. Until the mid seventies one notices a rise in the proportion of consumption expenditure on cereals, and thereafter, a steady decline reflecting a progressive increase in the relative expenditure on non-cereal or protective foods. About the same time the rising trend in the share of food in total consumption expenditure also begins to decline, raising the proportion of expenditure on non-food consumer goods. Simultaneously one also notices a sharper rise in the proportion of expenditure on consumer durables. Thus, what one sees is an upward movement in consumer demand along the hierarchy of consumer goods which amounts to a major change in consumer behaviour.As income rises in a poor country like India, the poor people concentrate on increasing their consumption of

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If income is Rs 1000 and consumption expenditure is Rs 200, APS will bea)-0.8b)0.2c)0.8d)-0.2Correct answer is option 'C'. Can you explain this answer?
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