Average and Marginal Propensity to consume


What is the average and marginal propensity to consume?

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Accountancy Kritika Gupta 12 months 1 Answer 201 views 0

Answer ( 1 )

  1. Propensity to consume refers to a schedule which shows the levels of consumption at different levels of income in an economy
    1.Average propensity to consume:
    It is the ratio between total consumption (c) and total income (y) at a given level of income in the economy or it is the ratio of the consumption expenditure to the corresponding level of income.
    APC = consumption (c) /Income (y).
    2.Marginal propensity to consume :
    It is the ratio between change in consumption to the change in income.
    Mpc =change in consumption /change in income.

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