Consumption is $3,600 when income is $4,000, and consumption rises to $4,400 when income is $5,000. What is the marginal propensity to consume?
A)0.9
B)0.2
C)0.8
D)0.5

Question

Quizplus · Accepted Answer

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

MPC = (Change in consumption) / (Change in income)
MPC = ($4,400 - $3,600) / ($5,000 - $4,000)
MPC = $800 / $1,000
MPC = 0.8

Therefore, the answer is (C) 0.8.

Consumption Is $3,600 When Income Is $4,000, and Consumption Rises