[Solved] When income increase, consumption also increases :

McqMate

Q.	When income increase, consumption also increases :
A.	in a lower proportion
B.	in a higher proportion
C.	in the same proportion
D.	None of the options
Answer» A. in a lower proportion
Explanation: 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 behavior 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 =employment, illness, etc. In simple words, the marginal propensity to consume decreases, i.e., house-holds spend a decreasing proportion of marginal income on consumption.

2.8k

0

Do you find this helpful?

26

View all MCQs in

Discussion

No comments yet

Related MCQs

When the demand for a good increases with an increase in income, such a good is called -
Which law states that with constant taste and preferences, the proportion of income spend on food stuff diminishes as income increases?
An Increase in national income because of an increase in price is called-
An increase in per capital income is not an indication of an increase in the economic welfare of the people -
The ratio of the total increase in a country’s national income to the increment in export revenue generating the increase is called:
Consumption function expresses the relationship between consumption and -
Which law of economics states that “with given preferences or tastes, the proportion of income spent on food diminishes as income increase”?
Thomas Robert Malthus (1766 – 1834) was a British economist who is remembered for his essays on population. In his which famous work he said, “Population, when unchecked, increases in a geometrical ratio. Subsistence only increases in an arithmetical ratio.”?
Income and consumption are :
The functional relationship between income and consumption expenditure is explained by -