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Consumption Function: "Consumption Is The Sole End and Purpose of All Production." Adam Smith
Consumption Function: "Consumption Is The Sole End and Purpose of All Production." Adam Smith
0 10 -10
100 100 0
200 190 10
300 280 20
400 370 30
500 460 40
Consumption function
diagram(Y1Y2>C1C2; 45 degree line
zero-saving line)
Features of Propensity to Consume
1. Subjective factors
2. Objective factors
• Income Redistribution
• Increased Wages
• Social Security Measures
• Credit Facilities
• Advertisement
• Development of the Means of Transport
• Urbanisation
QUESTION QUESTION
Calculating APC and MPC
Yd C APC ?? MPC ?? S ??
0 100 - - -
100 175
200 250
300 325
400 400
500 475
600 550
Calculating APC and MPC
Yd C APC MPC S=Yd-C
0 100 - - -100
100 175 1.75 0.75 -75
200 250 1.25 0.75 -50
300 325 1.08 0.75 -25
400 400 1 0.75 0
500 475 0.95 0.75 25
600 550 0.92 0.75 50
QUESTION