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Question
Define marginal propensity to consume (MPC).
Solution
Marginal Propensity to Consume:
1. The marginal propensity to consume may be defined as the ratio of the change in consumption to the change in income. Algebraically it may be expressed as under:
MPC = `("ΔC")/("ΔY")`
Where, ∆C = Change in Consumption; ∆Y = Change in Income
MPC is positive but less than unity, 0 < `("ΔC")/("ΔY")` < 1.
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