Abstract: The informal sector or informal economy is the part of an economy that are not taxed, regulated, monitored or included in the gross national product (GNP) by any form of government. This paper attempts to expresses the current situation of the informal economy of Dhaka City (South) as well as marginal propensity to consume (MPC) and marginal propensity to save (MPS) of the vendors by using Keynes consumption function. In addition, this paper also tries to illustrate the overall scenario of these vendors. To exemplify the result this study used primary data of 50 vendors of the areas of five different locations of Dhaka City (South) in the month of April, 2016. Moreover, this study finds that MPS of most of the vendors of the informal sector of Dhaka city (South) is small due to their higher MPC. As a result, it leads to low investment, which might have a significant impact in the economy. In light of the general poverty, low technology and development, informal activities are often considered as an economic, political and social value for public discontent. Nevertheless, transformation in the long run is a necessity for these countries as well.
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