Explain why MPC is always positive and not greater than one?

Answer :

According to Keynesian Consumption function, there is always some minimum level of C (consumption) irrespective of level of Y (income), since at zero level of income also people will consume (past savings), so consumption is positive. Thus MPC is always positive, cannot be less than zero.

Also an increase in Consumption tends to lag behind the increase in income, because, after certain level of income is reached, people start saving a part of income. Since increase in consumption (∆C) is less than that of increase in income (∆Y) the value of MPC must be less than one.

Thus,

MPC (c) ranges from zero and 1 0 < c < 1