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 :

A and B only

The correct answer is option (1) : A and B only

Let’s analyze each statements:

A. Consumer may choose not to change consumption when income has changed then MPC = 0. This is true. If consumption does not change when income changes, the Marginal Propensity to Consume (MPC) is zero because there is no increase in consumption with an increase in income.

B. Consumer may entirely choose to spend the additional income, then MPC = 1. This is also true. If the consumer spends all of the additional income received, the MPC is one because the entire change in income is used for consumption.

C. Consumer may choose not to change consumption when income has changed then MPC = 1. This is incorrect. If consumption does not change when income changes, the MPC is zero, not one.

D. Consumer may choose to spend entire change in income then MPC = 0 This is incorrect. If the consumer spends the entire change in income, the MPC is one, not zero.

E. Consumer may choose to spend entire change in income then MPC = ∞ This is incorrect. The MPC cannot be infinite. It is always a value between 0 and 1.