The value that marginal rate of propensity can take in consumption function.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 0 < MPC < 1
The Marginal Propensity to Consume (MPC) measures the fraction of additional income that a consumer spends on consumption.
MPC=ΔC / ΔY
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If income increases by ₹1 and a part of it is consumed, then MPC will lie between 0 and 1.
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MPC = 0 means no extra consumption (all income saved).
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MPC = 1 means entire additional income is consumed.
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Therefore, normally: 0<MPC<1