$$\begin{array} { | c | r | }
\hline \text { Disposable Income } & \text { Saving } \
\hline \$ 0 & - \$ 10 \
\hline 50 & 0 \
\hline 100 & 10 \
\hline 150 & 20 \
\hline 200 & 30 \
\hline
\end{array}$$ Refer to the given data for a hypothetical economy. The marginal propensity to consume is
A) 0.80.
B) 0.75.
C) 0.20.
D) 0.25.

Question

$$\begin{array} { | c | r | } 
\hline \text { Disposable Income } & \text { Saving } \
\hline \$ 0 & - \$ 10 \
\hline 50 & 0 \
\hline 100 & 10 \
\hline 150 & 20 \
\hline 200 & 30 \
\hline
\end{array}$$ Refer to the given data for a hypothetical economy. The marginal propensity to consume is
A) 0.80.
B) 0.75.
C) 0.20.
D) 0.25.

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in disposable income. From the table, when disposable income increases from $50 to $100, saving increases from $0 to $10, indicating that consumption increased by $40 ($50 increase in income - $10 increase in saving). Therefore, MPC = $40 / $50 = 0.80.

Refer to the Given Data for a Hypothetical Economy