Question
When income increase, consumption also increases :
Answer: Option D
Answer: (d)
According to the Keynesian Consumption theory, “men are disposed, as a rule, and on average, to increase their consumption as their income increases, but not by as much as the increase in their income.”
Another feature of consumer behaviour is that when income increases, people do not spend their entire incremental income on consumption. They save a part of it for their financial security during the period of unemployment, illness, etc.
In simple words, the marginal propensity to consume decreases, i.e., households spend a decreasing proportion of marginal income on consumption.
That is why families on a lower-income scale save a lower percentage of their income and those on a higher scale of income save a larger proportion of their income.
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Answer: (d)
According to the Keynesian Consumption theory, “men are disposed, as a rule, and on average, to increase their consumption as their income increases, but not by as much as the increase in their income.”
Another feature of consumer behaviour is that when income increases, people do not spend their entire incremental income on consumption. They save a part of it for their financial security during the period of unemployment, illness, etc.
In simple words, the marginal propensity to consume decreases, i.e., households spend a decreasing proportion of marginal income on consumption.
That is why families on a lower-income scale save a lower percentage of their income and those on a higher scale of income save a larger proportion of their income.
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