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) 0.2
B) 0.8
C) 2.0
D) 100

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in consumption (C) for a given change in disposable income (YD), which in the equation C = 100 + 0.8YD is represented by the coefficient of YD, which is 0.8.

Suppose the Consumption Function Is Given by the Equation C