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December 20, 2014

December 20, 2014

Posted by **hadi** on Wednesday, September 20, 2006 at 5:50pm.

The marginal propensity to consume (MPS) the percent of an additional amount of income that would be spent on consumption (by a person or a group of people). Whatever the person doesnt spend, is by definition, savings; MPS=(1-MPC). So, with MPC=.75, if income rose by, say, $100 then consumption would rise by $75, savings by $25.

Current statistics show that current savings rates are quite low, relative to previous generations.

The Average propensity to consume APC is simply (total consumption)/(total income)

In general, the MPC is a "statistic" regarding the marginal income. You should not generally infer information about the APC based solely on the MPC. That said, IF the MPC is constant across all income classes, then the MPC=APC.

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