The rate of increase in ex-ante consumption due to a unit increment in income is called

Correct option is C

The correct answer is (c) marginal propensity to consume.

The Marginal Propensity to Consume (MPC) refers to the fraction of additional income that is spent on consumption rather than being saved. It is calculated as the change in consumption divided by the change in income:

​$$MPC=\frac{\Delta C}{\Delta Y}$$​​

Where:

• $$ΔC$$​ = Change in consumption
• ΔY = Change in income

MPC measures the responsiveness of consumption to changes in income. For example, if a person’s income increases by 1 unit and they spend 0.8 units on consumption, their MPC is 0.8.

Information Booster:

·         Marginal Propensity to Consume (MPC) lies between 0 and 1.

·         A higher MPC indicates a higher tendency to spend additional income on consumption.

·         Average Propensity to Consume (APC) is the ratio of total consumption to total income.

·         Marginal Propensity to Save (MPS) is the fraction of additional income that is saved, and it is related to MPC by the formula: MPC+MPS=1.

·         Average Propensity to Save (APS) refers to the ratio of total savings to total income.