If consumption equals 800 when disposable income is 1,000,and then consumption increases to 1,000 when disposable income increases to 1,300,the marginal propensity to consume is
A)8/10.
B)10/13.
C)2/3.
D)3/4.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the increase in consumption that results from a one unit increase in disposable income. In this case, the increase in disposable income is 300 (from 1000 to 1300) and the increase in consumption is 200 (from 800 to 1000). Therefore, the MPC is 200/300, which simplifies to 2/3.

If Consumption Equals 800 When Disposable Income Is 1,000,and Then