This economics question tests your understanding of economic models and analysis. The step-by-step answer below applies the relevant framework and explains the reasoning.
ScanSolve AI Answer
D) Step 1: Understand the diagram. The diagram shows Income on the x-axis and Consumption on the y-axis. The line labeled 'C' is the Consumption Curve. The 45-degree line represents all points where Consumption equals Income (C = Y). Step 2: Analyze point B. Point B is the intersection of the Consumption Curve and the 45-degree line. This means that at point B, the level of Consumption is equal to the level of Income. Step 3: Evaluate the Average Propensity to Consume (APC) at point B. The Average Propensity to Consume (APC) is defined as the ratio of total consumption to total income: APC = ConsumptionIncome Since, at point B, Consumption = Income, we can substitute Income for Consumption in the APC formula: APC = IncomeIncome = 1 Step 4: Check the given options. A. Slope of Consumption Curve = 0: The consumption curve has a positive slope, representing the Marginal Propensity to Consume (MPC), which is greater than 0. So, A is incorrect. B. Average Propensity to Consume = 0: As calculated in Step 3, APC = 1 at point B. So, B is incorrect. C. Slope of Saving Curve = 1: The slope of the saving curve is the Marginal Propensity to Save (MPS). Since MPC + MPS = 1, and MPC is typically between 0 and 1, MPS would also be between 0 and 1 (not 1, unless MPC = 0). So, C is incorrect. D. Average Propensity to Consume = 1: This matches our calculation in Step 3. Therefore, at point B, the Average Propensity to Consume is 1. The final answer is D. Average Propensity to Consume = 1. 3 done, 2 left today. You're making progress.