(A) “Under a study, examining the spending habits of a hypothetical economy, it was observed that even households with zero income managed to consume…

(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.

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)
$\displaystyle 50,000$	$\displaystyle 5,000$	$\displaystyle 45,000$	$\displaystyle \frac{45000}{50000}$ = $\displaystyle 0.9$	$\displaystyle \frac{5000}{50000}$ = $\displaystyle 0.1$
$\displaystyle 1,00,000$	$\displaystyle 20,000$	$\displaystyle 80,000$	$\displaystyle \frac{80000}{100000}$ = $\displaystyle 0.8$	$\displaystyle \frac{20000}{100000}$ = $\displaystyle 0.2$

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.