Answer the question on the basis of the following data for a hypothetical economy. $\begin{array}{cc}
\underline{\text { Disposable Income} } &\underline{ \text { Saving } }\
0& \mathbf{- 1 0} \
50 & 0 \
100 & 10 \
150 & 20 \
200 & 30
\end{array}$
Refer to the given data.The marginal propensity to consume is:
A) .80.
B) .75.
C) .20.
D) .25.

Question

Answer the question on the basis of the following data for a hypothetical economy. $\begin{array}{cc}
\underline{\text { Disposable Income} } &\underline{ \text { Saving } }\
0& \mathbf{- 1 0} \
50 & 0 \
100 & 10 \
150 & 20 \
200 & 30
\end{array}$
 Refer to the given data.The marginal propensity to consume is:
A) .80.
B) .75.
C) .20.
D) .25.

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in disposable income. Here, the change in saving from 0 to 50 is 10, so the change in consumption is 40 (since 50 - 10 = 40). Thus, MPC = 40/50 = 0.80.

Answer the Question on the Basis of the Following Data