NECO 2007 Economics · Question 35

If total Income is N15m and total consumption Is N3m. then the average propensity to consume is

Options

A.0.2
B.0.6
C.0.7
D.5
E.10

Answer: A. 0.2

Explanation written with AI and checked against the answer key

Analyze the question: We are given total income (Y) = N15m and total consumption (C) = N3m, and we need the average propensity to consume (APC). Concept: The average propensity to consume is the proportion of total income that is spent on consumption. APC = C / Y (Don't confuse this with the marginal propensity to consume, MPC = ΔC / ΔY, which deals with changes in income and consumption.) Solution: APC = Total consumption / Total income APC = 3m / 15m APC = 1/5 = 0.2 Check: If 0.2 of income is consumed, then APC + APS = 1 means the average propensity to save is 0.8, which is consistent with N12m saved out of N15m (12/15 = 0.8). The two add up to 1. Answer: The correct option is A. 0.2. Exam tip: Remember "C over Y" for APC, and "S over Y" for APS. Always put consumption on top. Options like 5 (which is Y/C, the inverse) are common traps. APC is usually a fraction between 0 and 1, so you can immediately eliminate D and E.

AI can make mistakes. Report anything that looks wrong.