If income rises from $12,000 to $12,400 and consumption rises from $11,800 to $12,176,the marginal propensity to consume is __________ percent.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated by the change in consumption divided by the change in income. Here, the change in consumption is $12,176 - $11,800 = $376, and the change in income is $12,400 - $12,000 = $400. Thus, MPC = $376 / $400 = 0.94 or 94%.

If Income Rises from $12,000 to $12,400 and Consumption Rises