When Joe's disposable income is $50,000,his consumption expenditure is $45,000,and when his disposable income is $60,000,his consumption expenditure is $53,000.Joe's marginal propensity to consume is
A)$8,000.
B)1.25
C)80.
D)100.
E)0.80.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in consumption expenditure corresponding to a change in disposable income.

MPC = ΔConsumption Expenditure / ΔDisposable Income

Using the values given in the problem:

ΔConsumption Expenditure = $53,000 - $45,000 = $8,000

ΔDisposable Income = $60,000 - $50,000 = $10,000

MPC = $8,000 / $10,000 = 0.80

Therefore, the correct answer is E: 0.80.

When Joe's Disposable Income Is $50,000,his Consumption Expenditure Is $45,000,and