If Carolyn's consumption rises by $5,000 as her income increases from $26,000 to $32,000 per year,her marginal propensity to consume is
A) 0.16.
B) 19.
C) 0.83.
D) 1.20.
E) impossible to determine from the data.

Question

Quizplus · Accepted Answer

Marginal propensity to consume (MPC) is the ratio of the change in consumption to the change in income.

MPC = ΔC / ΔY

Here, Carolyn's consumption rises by $5,000 as her income increases from $26,000 to $32,000 per year.

So, 
ΔC = $5,000 
ΔY = $32,000 - $26,000 = $6,000

MPC = ΔC / ΔY = $5,000 / $6,000 = 0.83

Therefore, the answer is C, 0.83.

If Carolyn's Consumption Rises by $5,000 as Her Income Increases