Question

If income rises from $1,000 to $1,400 and consumption rises from $800 to $1,168, the marginal propensity to consume is __________ percent.

Answer 1

Answer:

The marginal propensity to consume is 92 percent.

Explanation:

Marginal propensity to consume (MPC) refers to the additional expenditure on consumption by consumer as a result of an in national income.

That is, MPC is a measure of the proportion or percentage of the additional income that goes consumption expenditure.

MPC can be calculated using the following formula

MPC = ΔC / ΔY ......................................... (1)

Where;

ΔC = Change in consumption = New consumption - Old consumption = $1,168 - $800 = $368

ΔY = Change in income = New income - Old income = $1,400 - $1,000 = $400

Substituting the values into equation (1), we have:

MPC = $368 / $400 = 0.92, or 92%

Therefore, the marginal propensity to consume is 92 percent.