The rate of increase in ex-ante consumption due to a unit increment in income is called?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Marginal Propensity to Consume.
Consumption has two parts. Autonomous consumption takes place even when income is zero; induced consumption depends on income, and when income rises by Re 1 it rises by a fraction c. That fraction, the rate at which planned (ex ante) consumption increases for each unit increase in income, is the marginal propensity to consume (MPC):
MPC = ΔC / ΔY
A change in consumption can never exceed the change in income, so the MPC lies between 0 and 1.
Why the other options are incorrect
Option (2) Average Propensity to Consume. — Incorrect. APC = C/Y is consumption per unit of income at one level of income, a ratio of totals and not of changes.
Option (3) Autonomous Consumption — Incorrect. Autonomous consumption is the part of consumption that does not depend on income at all.
Option (4) Aggregate Consumption. — Incorrect. This is the total consumption spending of all households, a level and not a rate of change.
Note: A same/similar question was asked in CUET (UG) in the papers below.
| 2026 | 2025 | 2024 | 2023 | 2022 |
| 23-05 S2* 24-05 S1 | – | – | – | – |
* A similar question.
NCERT (2025-26): “4.1.1. Consumption … Autonomous consumption is denoted by C and shows the consumption which is independent of income. If consumption takes place even when income is zero, it is because of autonomous consumption. The induced component of consumption, cY shows the dependence of consumption on income. When income rises by Re 1. induced consumption rises by MPC i.e. c or the marginal propensity to consume. It may be explained as a rate of change of consumption as income changes.” |