If consumption is $30,000 when income is $35,000, and consumption increases to $36,000 when income increases to $43,000, the MPC is
A) 0.65.
B) 0.75.
C) 0.80.
D) 0.95.

Question

Quizplus · Accepted Answer

MPC (marginal propensity to consume) is the change in consumption divided by the change in income.

MPC = (Change in Consumption) / (Change in Income)

Here,

Change in Consumption = $36,000 - $30,000 = $6,000

Change in Income = $43,000 - $35,000 = $8,000

MPC = $6,000 / $8,000 = 0.75

Therefore, the MPC is 0.75. The answer is choice B.

If Consumption Is $30,000 When Income Is $35,000, and Consumption