NCERT Solutions Class 12 Economics Aggregate Demand and Its Related Concepts. NCERT book for Economics in class 12 is strongly recommened by teachers and the CBSE and NCERT boards. Please download the NCERT solutions for class 12 Economics free in PDF made by teachers of the best schools in India. These solutions are carefully compiled to give detailed understanding of the concepts and also steps of solutions. The NCERT solutions are free to download in pdf format. Please refer to the download link below to download the pdf file and also refer to other chapters and subjects to get the solutions to Economics NCERT book questions and exercises.
Question 1. What is marginal propensity to consume? How is it related to marginal propensity to save?
Answer: (i) The ratio of change in consumption (C) to change in income (Y) is known as marginal propensity to consume. It indicates the proportion of additional income that is being spent on consumption.
The sum of MPC and MPS is equal to one. It can be proved as under: We know: ΔY = ΔC + ΔS Dividing both sides by AY, we get ,ΔY/ΔY=ΔC/ Y + ΔS/ΔY or 1=MPC+MPS [ΔY/ΔY=1; ΔC/ΔY =MPC ΔS/ΔY=MPS] MPC + MPS = 1 because total increment in income is either used for consumption or for saving.
Question 2. What do you understand by ‘parametric shift of a line’? How does a line shift when its (i) slope increases and (ii) its intercept increases?
Answer: (i)when b increases from 0.5 to 0.75, then consumption curve (which is a straight line) pivots upwards. This is called a parametric hift of a graph. It is shown in figure.
(ii)When C increases: It is the autonomous part of the consumption function. It graphically gives the intercept of the consumption curve. If increases from 2 to 5, there will be parallel upward shift in the consumption curves. It is shown in figure given.
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