Marginal Propensity to Consume is the ratio of change in consumption expenditure (△C) to change in total income (△Y).
Suppose △C = 70 and △Y = 100
Then, MPC = 70/100= 0.7
Average Propensity to Consume is the ratio of total consumption expenditure (C) to total income (Y).
Suppose C = 80 and Y = 100
APC = 80/100 = 0.8
| Average Propensity to Consume |
Marginal propensity to consume |
| Average propensity to Consume refers to the ratio of Consumption Expenditure . to the corresponding level of income. |
Marginal propensity to consume refers to the ratio of change in Consumption Expenditure (△C) to change in total income (△Y). |
| APC = Consumption (C)/Income (Y) |
MPC = Change in Consumption (△C)/Change in Income (△Y) |
| It can be greater than 1, equal to 1 or less than 1. |
Its value lies between 0 and 1. |
| It can never be zero. |
Its value can be zero. |
| Ex. Supposing at a given level of income of 300 crore consumption is 250 crore then APC will be 250/300 which is equal to 0.83. |
Er, Suppose income increases by 100 crore and consumption increases by 50 crore then MPC = 50/100 which is equal to 0.5. |
