What does the marginal propensity to consume falls as income rises mean?

Answer 1

Your marginal propensity to consume is the percentage of each ADDITIONAL dollar of income beyond your current that you will spend instead of save.

You can do two things with money, you can spend it or you can save it.

A poor person spends most of their money on living. As income rises the percentage of each additional dollar in added pay spent on living falls.

So, if you made $10,000 per year, you may consume 98% of it and save 2%.

If you made 20,000 dollars per year, you may consume 96.8% and save 3.2% of it.

If you made $50,000 per year you may consume 95% of it and save 5% of it.

And, if you made $1,000,000 per year you may spend 75% and save 25%.

However, the marginal propensity actually has to do with the next extra dollar you receive. In absolute technicality the math assumes you could actually split a penny up but the difference is trivial.

It is the change in your consumption divided by the change in your income.

Answer 2

propensity means: an inclination or tendency to do something.

so your statement means someones marginal inclination to consume (in this case it means to spend, as in money) falls as income goes up.

did that help you? if not repost and I will try and assist farther.

Answer 3

It means that the consumer saves a bigger percentage of his income as he earns more. Conversely, he/she is spending a lesser proportion of the income.

Answer 4

That, the more money you gain, the more you are willing to save.

As your salary rises, you tend to consume a smaller percentage of it and save a larger part.