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“Income of an economy… (Class 12 Economics 2026, Q16A)

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EconomicsCBSE Class 12 · Board exam 2026, set 58/1/1 · 6 marks · Long answer

CBSE Class 12 Economics 2026: question 16(A)

Set in the CBSE Class 12 board exam of 2026, paper 58/1/1, section A, question 16(A), for 6 marks. Try it first; the hints and our step-by-step solution are below.

Q16(A) · 6 marks · Long answerCompetency-basedDetermination of Income and Employment

“Income of an economy increased from ₹ 20,000 to ₹ 50,000 crore. Savings of the economy increased from ₹ 2,000 crore to ₹ 10,000 crore.”

  1. (i)

    Calculate Average Propensity to Consume (APC) and Average Propensity to Save (APS), before and after the rise in income.

    4 marks
  2. (ii)

    Draw appropriate conclusion regarding the behaviour of Average Propensity to Consume (APC) as his income increases.

    2 marks

Source: official question paper from cbse.gov.in (PDF). See it in the full 2026 board paper, set 58/1/1.

Hints

Open one hint at a time and try again before the next.

Hint 1

Find consumption first: C = Y − S.

Hint 2

APC + APS must equal 1.

Hint 3

Compare the two APC values.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. Consumption = Income − Saving. Before: C = 20,000 − 2,000 = ₹ 18,000 crore. After: C = 50,000 − 10,000 = ₹ 40,000 crore.

  2. (i) Before the rise: APC = C/Y = 18,000/20,000 = 0.9; APS = S/Y = 2,000/20,000 = 0.1.

    2 marks

  3. (i) After the rise: APC = 40,000/50,000 = 0.8; APS = 10,000/50,000 = 0.2. (Check: APC + APS = 1 in each case.)

    2 marks

  4. (ii) As income rises from ₹ 20,000 crore to ₹ 50,000 crore, APC falls from 0.9 to 0.8. So APC has an inverse relationship with income: people consume a smaller proportion of income as income grows (and save a larger proportion).

    2 marks

Answer: APC 0.9 and APS 0.1 before; APC 0.8 and APS 0.2 after. APC falls as income rises.

Where the marks are

  • APC and APS before (1 + 1)
  • APC and APS after (1 + 1)
  • Conclusion: APC falls as income rises (2)

Revise the chapter

Practise this chapterBoard-style questions from Determination of Income and Employment, one at a time, marked against the answer key and marking points.Back to the full paper2026 board paper, set 58/1/1: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.