Q3 · Practice questionSimple familiar1 mark
QUESTION 3
A household has disposable income of $1000 and consumption of $850. When income rises to $1100, consumption rises to $920. Its initial APC and its MPC are, respectively,
(A)
0.70 and 0.85.
(B)
0.85 and 0.70.
(C)
0.85 and 0.85.
(D)
0.15 and 0.30.
WORKED SOLUTION
1 markAnswer B
Answer
B
Working
APC = total consumption/disposable income = 850/1000 = 0.85. MPC = change in consumption/change in income = 70/100 = 0.70.
Marking criteria
- Select B. [1 mark]
Practice question aligned to the current QCAA syllabus; review the worked solution and marking criteria.
View the QCAA syllabus