The marginal propensity to consume is
A) real consumption/real disposable income.
B) real saving/real disposable income.
C) change in real consumption/change in real disposable income.
D) change in real saving/change in real disposable income.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in real consumption (ΔC) divided by the change in real disposable income (ΔYd). This is represented as MPC = ΔC/ΔYd. Therefore, C is the correct choice. Option A is incorrect because it gives the formula for the average propensity to consume (APC) instead of MPC. Option B is incorrect because it gives the formula for the average propensity to save (APS) instead of MPC. Option D is incorrect because it gives the formula for the marginal propensity to save (MPS), which is conceptually different from MPC.

The Marginal Propensity to Consume Is