A. Consumer may choose not to change consumption when income has chan…

A. Consumer may choose not to change consumption when income has changed then MPC =0

B. Consumer may entirely choose to spend the additional income, then MPC = 1.

C. Consumer may choose not to change consumption when income has changed then MPC = 1

D. Consumer may choose to spend entire change in income then MPC = 0

E. Consumer may choose to spend entire change in income then MPC = ∞

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → A and B only

The marginal propensity to consume (MPC) is the change in consumption for each unit change in income: MPC = ΔC/ΔY. Consumption cannot rise by more than income, so MPC lies between 0 and 1, both values included.

A. Consumer may choose not to change consumption when income has changed then MPC =0 — True. Consumption does not change, so ΔC = 0 and MPC = 0.

B. Consumer may entirely choose to spend the additional income, then MPC = 1. — True. The whole extra income is consumed, so ΔC = ΔY and MPC = 1.

C. Consumer may choose not to change consumption when income has changed then MPC = 1 — False. Unchanged consumption gives MPC = 0.

D. Consumer may choose to spend entire change in income then MPC = 0 — False. Spending the whole change in income gives MPC = 1.

E. Consumer may choose to spend entire change in income then MPC = ∞ — False. MPC cannot be more than 1, so it can never be infinite.

NCERT (2026-27): “4.1.1. Consumption … Now, let us look at the value that MPC can take. When income changes, change in consumption (∆C) can never exceed the change in income (∆Y). The maximum value which c can take is 1. On the other hand consumer may choose not to change consumption even when income has changed. In this case MPC = 0. Generally, MPC lies between 0 and 1 (inclusive of both values). This means that as income increases either the consumers does not increase consumption at all (MPC = 0) or use entire change in income on consumption (MPC = 1) or use part of the change in income for changing consumption (0< MPC<1).…”