Question

Give reasons "The Propensity to Consume means consumption function".

Answer 1

The propensity to consume also refers to consumption relationship as it is the functional relationship between two aggregates, that is the total consumption and the gross national income.

• MPC is characterized as the proportion of an overall increase in pay expended by a customer on the consumption of goods and services, rather than saving it.  
• MPC is defined by a demand line generated by plotting the increase in consumption on the y axis and the difference in sales on the x axis.
• MPC varies by the income level, which means it is typically lower at the higher incomes.

Answer 2

Reason:

The Propensity to Consume, also called the function of consumption, is an expression of an empirical relationship of consumption of income. M.J. Keynes notes that other factors are equivalent expenditures are a feature of revenue.

The association between consumption as a dependent variable and gross output as an independent variable is described as:

C = f (Y)

C - Aggregate consumption expense,

Y - Aggregate revenue,

f - Functional relationship propensity of output or practical usage shows the relationship between aggregate consumption spending (C) and aggregate revenue (Y).

A propensity for consumption does not mean a mere desire to consume, but the actual amount of real consumption that occurs or is expected to occur at different levels of income.

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