Page 3 - Home Assignment- AD and related concepts

b. Induced consumption.

c. Marginal propensity to consume.

d. with the help of a schedule and diagram state the nature of
consumption curve.

Ans: a. = 50
0
b. . =0.5Y

c. MPC = 0.5

d.
Y C = 50+0.5Y
0 50
100 100
200 150

300 200
400 250
500 300

Chart Title
350
300 S = 0.5x + 50
250
200
150
100
50
0
0 100 200 300 400 500 600

• The consumption curve slopes upward making an intercept on the
positive side of Y-axis because of autonomous consumption.
• A direct relationship exists between consumption an national income.

Meaning of investment: -
Investment refers to creation of new capital assets. It is of two types such as

1. Autonomous Investment: - It refers to the investment which is not
affected by changes in the level of national income and is not induced solely
by profit motive. Usually it remains constant and a horizontal straight line