If Real Disposable Income Increases, the Average Propensity to Consume

question 150

Multiple Choice

If real disposable income increases, the average propensity to consume will

• A) initially increase, and then decrease.
• B) remain constant.
• C) increase.
• D) decrease.

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Definitions:

Excludable

Describes a good or service for which it is possible to prevent non-paying consumers from access, through mechanisms like price or physical restrictions.

Public Good

A product or service that is made available to all members of a society, typically free of charge, and which no individual can be excluded from using.

Common Resource

A shared resource that multiple parties can access and use, which often leads to overuse and depletion due to a lack of exclusive ownership.

Positive Externality

A benefit that affects a party who did not choose to incur that benefit, often associated with public goods or services that extend beyond the direct participants in an economic activity.