Average propensity to consume (APC): Ratio between total consumption expenditure and aggregate income (C/Y). Marginal propensity to consume (MPC): Ratio between addition to total consumption expenditure and addition to total income (∆C/∆Y). It varies between zero and one. Diagrammatically show the consumption function, C = a + bY. Consumption function, C = a + bY Where; C is consumption expenditure; is consumption (autonomous consumption) at zero of income and it a remains constant; is marginal propensity to consume (∆C/∆Y) or slope of consumption function; b and Y is level of income. What is absolute income theory of consumption? Or, what is Psychological law of consumption? Prof. Keynes laid stress on the absolute size of income as a determinant of consumption and his theory is known as absolute income theory of consumption. He gave a which state that psychological law of consumption as income increases consumption increases but not by as much as the increase in income. In this theory of consumption, Keynes three points:
Average propensity to consume (APC): Ratio between total consumption expenditure and aggregate income (C/Y). Marginal propensity to consume (MPC): Ratio between addition to total consumption expenditure and addition to total income (∆C/∆Y). It varies between zero and one. Diagrammatically show the consumption function, C = a + bY. Consumption function, C = a + bY Where; C is consumption expenditure; a is consumption (autonomous consumption) at zero of income and it remains constant; b is marginal propensity to consume (∆C/∆Y) or slope of consumption function; and Y is level of income. What is absolute income theory of consumption? Or, what is Psychological law of consumption? Prof. Keynes laid stress on the absolute size of income as a determinant of consumption and his theory is known as absolute income theory of consumption. He gave a psychological law of consumption which state that as income increases consumption increases but not by as much as the increase in income. In this theory of consumption, Keynes three points:
chapter-_4_consumption_and_saving.docx