Data on after-tax income and consumption spending for the Adam Smith family are given below: $$\begin{array} { c c }
\text { After-tax Income } & \text { Consumption Spending } \
\$9,000& \$ 18,100 \
\$ 14,000 & \$ 22,600 \
\$ 19,000 & \$ 27,100 \
\$ 24,000 & \$ 31,600
\end{array}$$ Based on these data, the Adam Smith family has a marginal propensity to consume of:

Question

Data on after-tax income and consumption spending for the Adam Smith family are given below: $$\begin{array} { c c } 
\text { After-tax Income } & \text { Consumption Spending } \
\$9,000& \$ 18,100 \
\$ 14,000 & \$ 22,600 \
\$ 19,000 & \$ 27,100 \
\$ 24,000 & \$ 31,600
\end{array}$$ Based on these data, the Adam Smith family has a marginal propensity to consume of:

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in consumption spending divided by the change in after-tax income. In this case, the MPC is calculated as follows:MPC = (Change in consumption spending) / (Change in after-tax income)= (22,600 - 18,100) / (14,000 - 9,000)= 4,500 / 5,000= 0.9Therefore, the Adam Smith family has a marginal propensity to consume of 0.9.

Data on After-Tax Income and Consumption Spending for the Adam