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Abstract

The present study estimated the marginal propensity to consume (MPC) and the marginal propensity to save (MPS) of the businesses in informal sectors around Dhaka city by using the Keynes consumption function. Primary data is collected from 150 vendors from selected areas of Dhaka city during June -July, 2011. The findings indicated that MPS of most of the vendors of the informal sector was relatively small and their MPC was relatively very high. The MPC of 150 vendors was estimated to be 0.697 and their MPS was estimated to be 0.303. Thus it can be concluded that these vendors of informal sector in Dhaka city spent about 70% of their small income. The coefficients of consumption functions for all types of vendors are statistically significant at 1% level. The values of R2 for vegetable vendors, tea vendors, fuckha vendors, fruit vendors, mixed vendors and all vendors together are 0.77, 0.87, 0.79, 0.82, 0.92 and 0.85 respectively. The estimates of the multiple regression shows that the family size, saving, gender and family have significant impact on the expenditure along with income of the households in informal sectors of Dhaka city in Bangladesh.

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