Suppose consumption is $2,700 million when income equals $2,000 million, and consumption increases to $3,125 million when income equals $2,500. What is the marginal propensity to consume?

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the ratio of the change in consumption to the change in income. 
MPC = (Change in consumption / Change in income)
MPC = [(3,125 - 2,700) / (2,500 - 2,000)]
MPC = 0.85

Suppose Consumption Is $2,700 Million When Income Equals $2,000 Million