1.

Distinguish between marginal propensity to consume and marginal propensity to save. What is the relationship between the two?

Answer»

APC can be > 1 in situation when C > Y

Average Propensity to Consume (APC)Marginal Propensity to Consume (MPC
1. It refers to the ratio of consumption expenditure (C) to the corresponding level of income (Y) at a point of time. APC = C/Y1. When income increases APC falls but at a rate less than that of MPC.
2. It refers to the ratio of change in consumption expenditure (DC) to change in total income (DY) over a period of time. MPC = DC/DY2. When income increases, MPC falls but at a rate more than that of APC.


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