If your disposable income increases from $10,000 to $15,000 and your consumption increases from $9,000 to $12,000, your marginal propensity to consume is:

Question

Quizplus · Accepted Answer

Marginal propensity to consume (MPC) is defined as the change in consumption (ΔC) divided by the change in disposable income (ΔY).

MPC = ΔC/ΔY

Here, disposable income has increased from $10,000 to $15,000 (ΔY = $5,000) and consumption has increased from $9,000 to $12,000 (ΔC = $3,000).

MPC = ΔC/ΔY = $3,000/$5,000 = 0.6

Therefore, the marginal propensity to consume is 0.6.

If Your Disposable Income Increases from $10,000 to $15,000 and Your