ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -To calculate the marginal propensity to consume, the change in consumption is divided by the change in income. For instance, if a person’s spending increases 90% more for each new dollar of earnings, it would be expressed as 0.9/1 = 0.9.

Detailed explanation-2: -Marginal Propensity to Consume increases when consumption represents more of the amount of the added income rather than less. In other words, a person spends more and saves less. Typically, lower income levels produce a higher MPC than higher income levels.

Detailed explanation-3: -MPC equal to 1: When the MPC is equal to 1, it shows a proportionate increase in income levels leading to an equal increase in the consumption of goods.

Detailed explanation-4: -What Is the Marginal Propensity to Consume (MPC)? MPC refers to the amount of a raise in income that a person spends as opposed to saves. This makes it the complement to MPS; added together they should always equal one.

Detailed explanation-5: -MPC i.e. Marginal Propensity to Consume cannot be more than one as it is percentage change in consumption when there is some change in the level of income which cannot be more than the change in income.