Differentiate between APC and MPC.
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S.No.
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APC
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Basis
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MPC
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1.
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It is the ratio of consumption expenditure to the corresponding level of income (Y) at a point of time.
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Meaning
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It is the ratio of change in consumtion expenditure $(\Delta\text{C)}$ to change in income $(\Delta\text{Y)}$ over a period of time.
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2.
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APS can be more than one as long as consumption is more than national incomem, i.e., till the break-even point.
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Value more than one
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MPC cannot be more than one as change in consumption cannot be more than change in income.
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3.
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When income increases APC fails but at a rate of less than that of MPC.
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Response to change in income
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When income increases MPC also falls but at a rate of more than that of APC.
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4.
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$\text{APC}=\frac{\text{C}}{\text{Y}}$
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Formula
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$\text{MPC}=\frac{\Delta\text{C}}{\Delta\text{Y}}$ |
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