Which of the following is a reason for a decrease in the average propensity to consume with an increase in income?
A) The amount of savings decreases, and the consumption of necessities increases.
B) The expenditure on luxury goods increases, and the amount of savings decreases.
C) The expenditure on luxury goods represents only a small portion of income.
D) The amount of savings represents only a small portion of income.
E) The cost of necessities represents only a small portion of income.

Question

Quizplus · Accepted Answer

As income increases, the cost of necessities becomes a smaller portion of total income, leading to a higher savings rate and a decrease in the average propensity to consume.

Which of the Following Is a Reason for a Decrease