Distinguish between APC and MPC, The value of which of APC and MPC can be greater than one and when?

Solution

Distinction between APC and MPC:
(i) Total consumption expenditure divided by total income is APC. Symbolically APC = C/Y. The change in consumption expenditure divided by change in income is MPC.
(ii) When income increases, both APC and MPC fall but MPC falls more rapidly.
(iii) Between APC and MPC, the value of APC can be greater than 1 only when consumption expenditure becomes greater than income.
Remember value of MPC cannot be greater than 1 because increase in consumption (ΔC) cannot be more than corresponding increase in income (ΔY).
The following consumption schedule illustrates the calculation of APC and MPC.

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