Q.What is meant by “Propensity to Consume” ?

The propensity to consume is the functional relationship between consumption and income, C = f(Y) — showing how much of income is spent on consumption.

In the Tamil Nadu HSC Class-12 Economics syllabus (Consumption and Investment Functions), the propensity to consume, also called the consumption function, expresses the functional relationship between consumption (C) and income (Y): C = f(Y). It shows how consumption spending changes as income changes. It is studied in two forms:

• Average Propensity to Consume (APC) = C/Y — the ratio of total consumption to total income.
• Marginal Propensity to Consume (MPC) = ΔC/ΔY — the ratio of the change in consumption to the change in income. …