Marginal propensity to consume (MPC) and comparative analysis of flexibility of Chinese urban residents with different income levels

From the perspective of co-integration analysis,this paper studies the consumption and income function,its error correction model as well as consumption and income elasticity function of urban residents with different income levels from 1992 to 2011.The consumption and income function shows that the marginal propensity to consume of the residents with middle and low income tends to be larger and the residents with low income are more willing to consume than the residents with high income.The consumption and income elasticity function shows that the income elasticity of all residents with different income levels is less than 1,which is low and lack of flexibility,indicating that urban residents' attitude to consumption is very cautious in China.The error correction model shows that income plays a key role in the residents' consumption,which functions as the gravitational line in co-integration relation which can pull a non-equilibrium state back to a equilibrium state.