AVERAGE PROPENSITY TO CONSUME MARGINAL PROPENSITY TO CONSUME

42.  AVERAGE PROPENSITY TO CONSUME
MARGINAL PROPENSITY TO CONSUME
1.      Meaning
It refers to the ratio of consumption to income. It is the level of consumption at each level of income.

2.      Formula
It is calculated with the help of following formula: APC = C/Y
3.      Range
It can be more than one when the consumption expenditure is more than income. It can be less than one when income is more than consumption.

It is the ratio of change in consumption to change in income. It is the increase in consume due to increase in income.


It is calculated with the help of following formula:
MPC = ∆ C/ ∆ Y


MPC lies between Zero and one. If no amount is spent from additional increase income, MPC will be zero. If equal amount of increase in income is spent, MPC will be one.