The slope of the consumption function relates changes in consumer spending to changes in disposable income received by consumers. This is called:
A) the marginal propensity to consume.
B) the average propensity to consume.
C) the utility-maximization function.
D) the marginal rate of transformation.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) measures the fraction of a change in disposable income that is spent on consumption. In other words, it is the slope of the consumption function. Therefore, the correct answer is A. B is incorrect because the average propensity to consume (APC) measures total consumption spending as a fraction of total income, not the relationship between changes in consumption and changes in income. C is incorrect because the utility-maximization function relates the consumption of goods and services to the satisfaction or utility that consumers derive from consuming them, but it does not measure the relationship between changes in consumption and changes in income. D is incorrect because the marginal rate of transformation is a concept from production theory that measures the amount of one good that must be sacrificed to produce a unit of another good. It is not directly related to consumer spending or income.

The Slope of the Consumption Function Relates Changes in Consumer