Everything else held constant,if total consumption increases from $600 to $800 because of an increase of disposable income of $400,then the mpc is equal to
A)0.2.
B)0.4.
C)0.5.
D)0.6.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in disposable income. Here, the change in consumption is $200 ($800 - $600) and the change in disposable income is $400. So, MPC = $200 / $400 = 0.5.

Everything Else Held Constant,if Total Consumption Increases from $600 to $800