When Tyson's income was $50,000 per year, his consumption was $47,500, and his saving was $2,500. Tyson recently got a $5,000 raise. He raised his consumption to $51,500 and his saving to $3,500. After the raise, Tyson's average propensity to consume is

Question

Quizplus · Accepted Answer

The average propensity to consume (APC) is calculated as consumption divided by income. After the raise, Tyson's income is $55,000 ($50,000 + $5,000), and his consumption is $51,500. Therefore, APC = $51,500 / $55,000 = 0.936 or approximately 0.95.

When Tyson's Income Was $50,000 Per Year, His Consumption Was