The Marginal propensity to consume is 0.4
Here, we are calculating the marginal propensity to consume (MPC).
Change in Income = New Income - Old Income
Change in Income = $75,000 - $50,000
Change in Income = $25,000
Change in Consumption = New Consumption - Old Consumption
Change in Consumption = $40,000 - $30,000
Change in Consumption = $10,000
Marginal propensity to consume = Change in Consumption / Change in Income
Marginal propensity to consume = $10,000 / $25,000
Marginal propensity to consume = 2/5
Marginal propensity to consume = 0.4
Therefore, the Marginal propensity to consume is 0.4.
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