If the consumption function is C = 25 + (.80 × disposable income), what is the marginal propensity to consume?
A) .80
B) .20
C) .25
D) It is impossible to tell without knowing either the level of consumption or the level of disposable income.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in consumption resulting from a change in disposable income, represented by the coefficient of disposable income in the consumption function, which is .80 in this case.

If the Consumption Function Is C = 25