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Economics · 2026 · 6 marks
CBSE 2026 · Region 1 · Set 3 · Q16
“Under a study, examining the spending habits of a hypothetical economy, it was observed that even households with zero income managed to consume basic necessities.As the income of people increased, their consumption also increased, but not as rapidly as income.”Based on the given text and common understanding, answer the following questions :(i)Identify and elaborate the type of consumption indicated in the first para of the above text.(ii)Explain, the reason behind the positive slope of Aggregate Demand Curve.Income of an economy increased from ₹ $\displaystyle 50,000$ to ₹ $\displaystyle 1,00,000$ crore. Savings of the economy increased from ₹ $\displaystyle 5,000$ crore to ₹ $\displaystyle 20,000$ crore.(i)Calculate Average Propensity to Consume (APC) and Average Propensity to Save (APS) before and after the rise in Income.(ii)Draw appropriate conclusion regarding the behaviour of Average Propensity to Save (APS) as his income increases.
“Under a study, examining the spending habits of a hypothetical economy, it was observed that even households with zero income managed to consume basic necessities.
As the income of people increased, their consumption also increased, but not as rapidly as income.”
Based on the given text and common understanding, answer the following questions :
(i)
Identify and elaborate the type of consumption indicated in the first para of the above text.
(ii)
Explain, the reason behind the positive slope of Aggregate Demand Curve.
Income of an economy increased from ₹ $\displaystyle 50,000$ to ₹ $\displaystyle 1,00,000$ crore. Savings of the economy increased from ₹ $\displaystyle 5,000$ crore to ₹ $\displaystyle 20,000$ crore.
(i)
Calculate Average Propensity to Consume (APC) and Average Propensity to Save (APS) before and after the rise in Income.
(ii)
Draw appropriate conclusion regarding the behaviour of Average Propensity to Save (APS) as his income increases.
Marking-scheme solution
(A)(i) The type of consumption indicated in the above paragraph is Autonomous Consumption.
Autonomous Consumption is independent of level of income. Autonomous Consumption signifies the minimum level of consumption which is essential for survival.
(ii)
Aggregate Demand (AD) is the sum of consumption and investment. Based on the assumption that, investment is autonomous, thereby, when income rises, consumption also rises, which leads to a rise in Aggregate Demand. Hence, Aggregate Demand curve slopes upward, reflecting a direct relationship between income and Aggregate Demand.
OR(B)(i)
| Income (Y) (in ₹ crore) | Savings (S) (in ₹ crore) | Consumption (C = Y - S) (in ₹ crore) | APC (C/Y) | APS (S/Y) |
| $\displaystyle 50,000$ | $\displaystyle 5,000$ | $\displaystyle 45,000$ | $\displaystyle \frac{45000}{50000}$ = $\displaystyle 0.9$ | $\displaystyle \frac{5000}{50000}$ = $\displaystyle 0.1$ |
| $\displaystyle 1,00,000$ | $\displaystyle 20,000$ | $\displaystyle 80,000$ | $\displaystyle \frac{80000}{100000}$ = $\displaystyle 0.8$ | $\displaystyle \frac{20000}{100000}$ = $\displaystyle 0.2$ |
(ii)
From the given data, it can be concluded that as income increases from ₹ $\displaystyle 50,000$ to ₹ $\displaystyle 1,00,000$ crore, value of Average Propensity to Save (APS) increases from $\displaystyle 0.1$ to $\displaystyle 0.2$, thereby establishing a direct relationship between the level of income and APS.
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CBSE Class 12 Economics past-paper question from the 2026board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.