On the basis of given diagram, answer the following questions: (i) What is the value of autonomous consumption ? What is the break-even level of income or at what level of income saving is zero ? (iii) How much is APC corresponding to point E ? (iv) If MPC = 0.6, determine the consumption and saving function.

On the basis of given diagram, answer the following questions: (i) Wha

1.	On the basis of given diagram, answer the following questions: (i) What is the value of autonomous consumption ? What is the break-even level of income or at what level of income saving is zero ? (iii) How much is APC corresponding to point E ? (iv) If MPC = 0.6, determine the consumption and saving function.
Answer» (i) Consumption curve makes an itercept of ₹ 40 crores on the Y-axis. So, Autonomous Consumption (`barc`) = ₹ 40 crores. (ii) Break-even point occurs when Consumption = Income (or Saving = 0) So, Break-even level of income = ₹ 100 crores. (iii) At point E, C = Y = ₹ 100 crores. So, APC = `("Consumption(C)")/("Income(Y)")=(100)/(100)` = 1 Consumption Function is given as: C= `barc` +b(Y) Autonomous Consumption (`barc`) = ₹ 40 crores and b or MPC = 0.6 Putting value of b and (`barc`) in consumption function, we get: C= 40+0.6Y Saving Function in given as: S= -`barc`+(1-b)Y (1-b) or MPS = 1-MPC=1-0.6=0.4 Putting values of (1-b) or MPS and -(`barc`), we get: S=-40+0.4Y