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

1.	What is marginal propensity to consume ? How is it related to marginal propensity to save ?
Answer» Marginal propensity to consume (MPC) may be defined as the proportion of income that is consumed out of additional income. Thus, MPC = \(\frac{\Delta C}{\Delta\gamma}\) In other words, marginal propensity to consume refers to the ratio of change in consumption to change in income. There is direct relationship between marginal propensity to consume and marginal propensity to save. Change in income is either consumed or saved. Hence, marginal propensity to consume and marginal propensity to save will always be equal to one. Thus, MPC + MPS = 1.

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

Answer»

Marginal propensity to consume (MPC) may be defined as the proportion of income that is consumed out of additional income. Thus, MPC = \(\frac{\Delta C}{\Delta\gamma}\)

In other words, marginal propensity to consume refers to the ratio of change in consumption to change in income. There is direct relationship between marginal propensity to consume and marginal propensity to save. Change in income is either consumed or saved. Hence, marginal propensity to consume and marginal propensity to save will always be equal to one. Thus,

MPC + MPS = 1.

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