In the the case above, if the consumption function is: C = $500 + 0.75 × YD, from the equation, the The marginal propensity to consume is option C) 0.75.
<h3>What is MPC?</h3>
The marginal propensity to consume which is MPC is the aspect of each extra money that is dollar of a household's income that is said to be used, consumed or spent.
Note that Consumer behavior in regards to saving or spending has a very vital impact on the economy of a country.
From the formula given, the breakdown is:
YD = disposable income.
Autonomous consumption = $500.
The marginal propensity to consume = 0.75.
Therefore, In the the case above, if the consumption function is: C = $500 + 0.75 × YD, from the equation, the The marginal propensity to consume is option C) 0.75.
See full question below
Suppose that the consumption function is: C = $500 + 0.75 × YD
(Scenario: Consumption Spending) The marginal propensity to consume is:
A) $500.
B) 0.
C) 0.75
D) 0.2.
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