The ratio of the change in consumption to the change in disposable income is called the
A) marginal utility of consumption.
B) average utility of consumption.
C) marginal propensity to consume.
D) average propensity to consume.

Question

Quizplus · Accepted Answer

The ratio of the change in consumption to the change in disposable income is called the marginal propensity to consume (MPC). It measures the fraction of a change in disposable income that is spent on consumption. Option A, marginal utility of consumption, refers to the additional satisfaction gained from consuming an additional unit of a good, while option B, average utility of consumption, refers to the total satisfaction gained from consuming all units of a good divided by the number of units consumed. Option D, average propensity to consume, refers to the total amount of consumption divided by total disposable income.

The Ratio of the Change in Consumption to the Change