If the consumption function is C = 80 + 0.6Y, then the marginal propensity to consume equals:

Question

Quizplus · Accepted Answer

The formula for marginal propensity to consume is the change in consumption over the change in income. Therefore, the equation is MPC = ΔC/ΔY.
In this case, if we take the derivative of the consumption function C=80+0.6Y, we get:
dC/dY = 0.6
This means that for every $1 increase in income, consumption increases by $0.60. Therefore, the marginal propensity to consume is 0.6.

If the Consumption Function Is C = 80 + 0