Suppose the consumption function is given by the equation C = 100 + 0.8YD, where YD is disposable income. What is the marginal propensity to consume?
A)100
B)0.2
C)0.8
D)2.0

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in consumption divided by the change in disposable income. In this case, the MPC is 0.8, which means that for every additional dollar of disposable income, consumption will increase by 80 cents.

Suppose the Consumption Function Is Given by the Equation C