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propensity to consume


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The proportion of disposable income which individuals desire to spend on consumption. The average propensity to consume is total desired spending as a proportion of total disposable income; the marginal propensity to consume is the proportion of additional income that an individual desires to consume. The marginal propensity to consume is typically less than 1. The size of both the average and marginal propensities may be affected by factors such as the consumer's total assets, liquidity, and expectations of inflation.

Subjects: Economics.


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