The consumption schedule is such that:
A)both the APC and the MPC increase as income rises.
B)the APC is constant and the MPC declines as income rises.
C)the MPC is constant and the APC declines as income rises.
D)the MPC and APC must be equal at all levels of income.

Question

Quizplus · Accepted Answer

The consumption schedule shows how much households plan to consume at each level of income. APC (average propensity to consume) is the ratio of consumption expenditures to total income, while MPC (marginal propensity to consume) is the ratio of the change in consumption to the change in income. As income rises, the APC declines because a smaller proportion of income is spent on consumption. However, the MPC remains constant because each additional dollar of income is spent on consumption. Therefore, C is the best choice.

The Consumption Schedule Is Such That