Definition of PMA and PMC (Economy)

The habits of consumption and saving are issues that economy has been studying and addressing for a long time. Meanwhile, one of the economists who most studied these questions and whose conclusions would influence so much later if formulated has been British John Maynard Keynes, who during the last century, more precisely, developed two concepts to explain the aforementioned questions: Marginal Propensity to Save (PMA) and Marginal Propensity to Consume (PMC).

Just as he happened to all the men who proposed something that contradicted the doctrine of his time, Keynes, was much fought by his ideological adversaries and so were his proposals, however, his influenceAs we already said, it was incredible and they are still valid today.

Basically, Keynes believed that people tend to spend or save the additional income that they may earn at some point, as a result of an increase in their income. rent or in the salary that he receives, that is, if someone receives an increase in his salary, the most probable thing is that he will spend that additional amount that is received in the purchase of those things that could not be acquire even before receiving that sum, or there are also others who decide to save that extra sum to have it available in the future, as savings to meet contingencies, for case. And this would be the germ of the development of the aforementioned concepts.

Then the PMC will be that portion of the extra income that a employee intended for the consumption of goods and services. The MPC is plausible to be calculated through the following account: the change in consumption is divided by the change in income.
And for its part, the PMA will be, on the contrary, the portion of the extra money that an individual allocates to save it.

It is worth noting that these modifications in both variables have a impact direct on the formal economy since this relationship between consumption and production it will trigger changes in the gross product (GDP) for example. It is simple, if the MPC rises, then consumption also rises and therefore producers will increase their sales.