Question:
State the meaning of propensity to consume.
State the meaning of propensity to consume.
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The propensity to consume determines how much of an individual's income is allocated towards consumption, which impacts overall demand in the economy.
Updated On: July 22, 2025
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Solution and Explanation
The propensity to consume refers to the proportion of income that is spent on consumption rather than saved. It is a key concept in economics and is often expressed as the Marginal Propensity to Consume (MPC), which is the fraction of any additional income that is used for consumption.
A higher MPC means that individuals tend to spend more of their income on goods and services rather than saving it.
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