Question

Can MPC be negative or greater than 1? Why or why not?

Can MPC be negative or greater than 1? Why or why not?

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Answer #1

Answer : MPC is neither negative nor greater than 1 because MPC is the ratio of change in consumption expenditure and change in the disposable income.In other words, how consumption will vary with the change in income.As well as MPC is not greater than 1 because change in consumption is not greater than1. This shows that marginal prospernity to consume means that how consumption has been changed with the change in income.As MPC shows relationship between change in consumption with change in income.As percentage change in consumption with respect to change in income.

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