SELECT * FROM question_mgmt as q WHERE id=5421 AND status=1 SELECT id,question_no,question,chapter FROM question_mgmt as q WHERE courseId=3 AND subId=59 AND chapterId=605 and ex_no='1' AND status=1 ORDER BY CAST(question_no AS UNSIGNED) CBSE Free NCERT Solution of 12th macro-economics Determination of Income and Employment what is marginal propensity to consume how is it

Question:

What is marginal propensity to consume? How is it related to marginal propensity to save?

Answer:

Marginal propensity to consume refers to the ratio of change in the consumer’s expenditure due to the change in disposable income (income after deducting taxes). In other words, MPC measures how consumption will vary with the change in income.

So,
MPC
Where,
ΔC = Change in consumption
ΔY = Change in income

For example, if income increases from Rs 200 crores to Rs 250 crores and consumption increases from Rs 20 crores to Rs 40 crores, it implies that 0.4 is the MPC or 40% increase in the income is being consumed.


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