Q28 of 31 Page 1

FOR VISUALLY IMPAIRED CANDIDATES:


Calculate savings from the following saving function:


C = 20 + 0.6Y, Presuming the income levels to be 100, 200 and 300 crores. Also, calculate that level of income where consumption is equal to income.


C = 20 + 0.6Y


Y = C + S


At different levels of income C will be:


At Y = 100


C = 20 + 0.6Y


= 20 + 0.6 (100)


= 20 + 60


= 80


When C is 80 the Savings S will be


Y = C + S


100 = 80 + S


100 – 80 = S


S = 20


At Y = 200


C = 20 + 0.6 (200)


= 20 + 120


= 140


When C is 140 the Savings ‘S’ will be


Y = C + S


= 140 + S


200 = 140 + S


200 – 140 = S


S = 60


At Y = 300


C = 20 + 0.6 (300)


= 20 + 180


= 200


When C is 200 the Savings ‘S’ will be


Y = C + S


300 = 200 + S


300 – 200 = S


S = 100.


• When the income level is 100 Rs the Consumption ‘C’ is 80 and Savings is 20.


• When the income level is 200 Rs the Consumption ‘C’ is 140 and Savings is 60.


• When the income level is 300 Rs the Consumption ‘C’ is 200 and Savings is 100


The level of income where consumption is equal to income is:


Y = 20+0.6Y


Y-0.6Y = 20


0.4Y = 20


Y = 50


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