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

Question

Quizplus · Accepted Answer

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

MPC = (Change in consumption expenditure) / (Change in disposable income)

In this case, the change in consumption expenditure is $8,000 ($53,000 - $45,000) and the change in disposable income is $10,000 ($60,000 - $50,000).

MPC = 8000/10000 = 0.8

Therefore, the answer is B.

When Joe's Disposable Income Is $50,000, His Consumption Expenditure Is