Propensity to Consume
Keynes defined the propensity to consume as a functional relationship between the level of income and expenditure on consumption, and argued that ‘the amount that the community spends on consumption obviously depends (i) partly on the amount of its income, (ii) partly on the other objective attendant circumstances, and (iii) partly on the subjective needs and the psychological propensities and habits of the individuals composing it and the principles on which the income is divided between them’ (Keynes, 1936, pp. 90–91).
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