The marginal propensity to consume is defined to be
A)the change in desired consumption divided by total disposable income.
B)total desired consumption divided by total disposable income.
C)the change in desired consumption divided by the change in saving.
D)total desired consumption divided by the change in disposable income.
E)the change in desired consumption divided by the change in disposable income.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) measures the change in desired consumption (due to a change in income) relative to the change in disposable income. This is expressed as a ratio, where the change in desired consumption is the numerator and the change in disposable income is the denominator. Therefore, the correct choice is E, which is "the change in desired consumption divided by the change in disposable income."

The Marginal Propensity to Consume Is Defined to Be