Suppose consumption function for an economy is C = $\displaystyle 80$ + $\displaystyle 0.75$ Y (where C = consumption function and Y = national income) and the investment expenditure is ₹ $\displaystyle 200$ crore.

Estimate the following :

(a)

Equilibrium level of income

(b)

Values of consumption and saving at equilibrium level of income

Given, C = $\displaystyle 80$ + 0.75YI = ₹ $\displaystyle 200$ croreAs we know, at the equilibrium level, Y = C + IY = ($\displaystyle 80$ + 0.75Y) + $\displaystyle 200$$\displaystyle Y = \frac{280}{0.25}$ = ₹ $\displaystyle 1,120$ croreAt equilibrium level of Income; Y = ₹ $\displaystyle 1,120$ croreC = $\displaystyle 80$ + $\displaystyle 0.75$ ($\displaystyle 1120$)C = ₹ $\displaystyle 920$ croreY = C + SS = $\displaystyle 1120$ – $\displaystyle 920$ = ₹ $\displaystyle 200$ crore