Which of the following can have a value more than 1?
i. APS
ii. APC
iii. MPS
iv. MPC
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → ii only
MPC and MPS lie between 0 and 1, and saving can never be more than income. Only the APC can go above 1.
i. APS — Cannot exceed 1. S / Y is at most 1, because saving is a part of income.
ii. APC — Can exceed 1. At low income, autonomous consumption can make C larger than Y, so C / Y is above 1.
iii. MPS — Cannot exceed 1. MPS = 1 − MPC, and MPC is not negative.
iv. MPC — Cannot exceed 1. The change in consumption can never exceed the change in income.
NCERT (2026-27): “4.1.1 Consumption … Now, let us look at the value that MPC can take. When income changes, change in consumption ( ΔC ) can never exceed the change in income ( Δ 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).” “4.1.1 Consumption The most important determinant of consumption demand is household income. A consumption function describes the relation between consumption and income. The simplest consumption function assumes that consumption changes at a constant rate as income changes. Of course, even if income is zero, some consumption still takes place. Since this level of consumption is independent of income, it is called autonomous consumption. …” “Some Definitions Average propensity to consume (APC): it is the consumption per unit of income i.e., C/Y.” |