The consumption function of an economy is given as C = 60 + 6Y. Calculate the break- even level of income.
Asked by dwivediastha717
5th March 2018,
6:39 PM
Answered by Expert
Answer:
As per the question, C = 60 + 6Y
But, MPC can not be equal to 6 as we know that the value of MPC always lies between 0 and 1. So, let's take MPC = 0.6.
Now, we know, at break even level of income:
C = Y
60 + 0.6 Y = Y
60 =1 Y - 0.6 Y
0.4 Y = 60
Y = 150
Thus, break even level of income is Rs 150.
Answered by Expert
6th March 2018,
2:15 PM
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