Question

From the given table, identify that level of income, where Average Propensity to Save (APS) becomes zero: \[ \begin{array}{|c|c|c|} \hline \textbf{Income (Rs. crore)} & \textbf{Consumption (Rs. crore)} & \textbf{Savings (Rs. crore) (Y - C)} \\ \hline 0 & 50 & -50 \\ \hline 50 & 75 & -25 \\ \hline 100 & 100 & 0 \\ \hline 200 & 150 & 50 \\ \hline 300 & 200 & 100 \\ \hline 400 & 250 & 150 \\ \hline \end{array} \]

The level of income where Average Propensity to Save (APS) becomes zero is at Income = Rs. 100 crore, since savings (\( S = Y - C \)) equals zero at this point.

• A. 50
• B. 100
• C. 200
• D. 0

Hint:

When consumption equals income, APS becomes zero, indicating no savings.

Answer 1

The Correct Option is B

The Average Propensity to Save (APS) is calculated as: \[ {APS} = \frac{{Savings}}{{Income}} = \frac{{Income} {Consumption}}{{Income}} \] At Income = 100 crore, consumption is also 100 crore. Hence, savings will be zero: \[ {Savings} = {Income} {Consumption} = 100 100 = 0 \] Thus, APS = 0 when income is 100 crore. 
Conclusion: The APS becomes zero at 100 crore income because savings equal zero when consumption is equal to income.