Refer to the consumption schedule above. The average propensity to save at income level B is represented by:
A) 0C/0B
B) EF/BE
C) EF/BF
D) DE/AB

Question

Refer to the consumption schedule above. The average propensity to save at income level B is represented by:
A) 0C/0B 
B) EF/BE 
C) EF/BF 
D) DE/AB

Quizplus · Accepted Answer

The average propensity to save (APS) is the ratio of saving to income. The equation for APS is:
APS = Saving / Income
At income level B, the saving is BF and the income is AB. Therefore, the APS at level B is:
APS = BF / AB
In the consumption schedule, EF represents the saving at the income level B, and BF represents the total income at the same level. Thus, EF/BF represents the APS at level B. Therefore, the correct answer is choice C.

Refer to the Consumption Schedule Above