If income rises from $10,000 to $20,000 and consumption increases from $9,000 to $16,000, then the marginal propensity to consume is
A) 0.10.
B) 0.30.
C) 0.70.
D) 0.80.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in consumption divided by the change in income.

MPC = ΔC/ΔY

In this case, the change in income is $10,000 ($20,000 - $10,000) and the change in consumption is $7,000 ($16,000 - $9,000).

MPC = $7,000/$10,000 = 0.7

Therefore, the correct answer is C: 0.70.

If Income Rises from $10,000 to $20,000 and Consumption Increases