(Table: Consumption and Savings) Based on the table, the marginal propensity to consume is _____ and the average propensity to consume _____.
A) 0.5; varies with the level of income
B) $5,000; is $5,000
C) $10,000; is $35,000
D) 2; varies with the level of income

Question

(Table: Consumption and Savings) Based on the table, the marginal propensity to consume is _____ and the average propensity to consume _____. 
A) 0.5; varies with the level of income 
B) $5,000; is $5,000 
C) $10,000; is $35,000 
D) 2; varies with the level of income

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in consumption divided by the change in income. From the table, the increase in consumption from an increase in income of $10,000 is $5,000, therefore the MPC is 0.5. The average propensity to consume (APC) is total consumption divided by total income. From the table, the total consumption is $35,000 and the total income is $50,000, therefore the APC is 0.7. However, the question asks specifically for the APC at a given income level, which varies and cannot be determined solely from the table.

(Table: Consumption and Savings) Based on the Table, the Marginal