Suppose when John's income increases from $10,000 to $15,000, his consumption increases from $3,000 to $4,500. What is the value of his marginal propensity to save?
A) 0.7
B) 0.3
C) 0.2
D) 0.8

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in consumption divided by the change in income, which is ($4,500 - $3,000) / ($15,000 - $10,000) = $1,500 / $5,000 = 0.3. The marginal propensity to save (MPS) is 1 - MPC, so MPS = 1 - 0.3 = 0.7.

Suppose When John's Income Increases from $10,000 to $15,000, His