Question

The marginal propensity to consume ( MPC) is defined as the fraction of a. total income that a household consumes rather than saves. b. total income that a household either consumed or saved. c. extra income that a household consumes rather than saves. d. extra income that a household either consumes or saves.

Answer 1

Answer:

C

Explanation:

In economics, when the word Marginal is mentioned, it refers to additional, as in one extra unit.

For example when we hear marginal revenue, it means the revenue gotten from selling an additional unit, when we hear or speak of marginal cost, it is the cost of producing or getting one more unit.

Propensity is a tendency, an inclination to do something.

So adding the three words together, marginal propensity to consume will be the tendency or inclination to consume one extra unit as a result of earning extra income.

Hence (MPC) is the fraction of extra income consumed.

I hope the concept is clearer.