CA Foundation · Business Economics · Determination of National Income
The saving function of an economy is S = -150 + 0.25Y (₹ crore). At what level of income is consumption exactly equal to income, i.e., the break-even point?
The break-even income is ₹600 crore. At this point saving is zero, so -150 + 0.25Y = 0, which gives Y = 150 divided by 0.25 = 600. Consumption then equals income, as all income is spent.
- A₹300 crore
- B₹600 croreCorrect
- C₹750 crore
- D₹150 crore
Explanation
At the break-even point S = 0, so -150 + 0.25Y = 0, giving Y = 150/0.25 = ₹600 crore. Check: C = Y - S = 600 - 0 = 600. The value ₹300 crore wrongly uses 0.5 in place of 0.25.
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