Option 1 -> This assumes MPC = 1 (entire income increase consumed), but given MPC = 0.60.
Option 2 -> This implies MPC = 0.80 (4000/5000), which doesn't match the given MPC.
Option 3 -> Correctly applies the formula: Increase in Consumption = MPC × Change in Income = 0.60 × 5000 = Rs. 3000.
Option 4 -> This implies MPC = 0.40 (2000/5000), which is incorrect.
Hence, Option 3: Increase in consumption= Rs. 3000 -> The Marginal Propensity to Consume (MPC) represents the proportion of additional income that is spent on consumption. Using the formula: Change in Consumption = MPC × Change in Income = 0.60 × 5000 = Rs. 3000. The remaining Rs. 2000 (40%) would be saved, as MPS (Marginal Propensity to Save) = 1 - MPC = 0.40. -> correct