Table 8.7
-Refer to Table 8.7.Given the consumption schedule in the table above, the marginal propensity to save is
A)0.3.
B)0.4.
C)0.5.
D)0.6.
E)0.8.

Question

Table 8.7 
-Refer to Table 8.7.Given the consumption schedule in the table above, the marginal propensity to save is
A)0.3. 
B)0.4. 
C)0.5. 
D)0.6. 
E)0.8.

Quizplus · Accepted Answer

Marginal propensity to save (MPS) is the change in saving that results from a change in income. We can calculate MPS by dividing the change in saving by the change in income. In the given consumption schedule, when income increases from 700 to 800, consumption increases from 900 to 1050, which is a change in consumption of 150. During the same period, saving increases from 100 to 150, which is a change in saving of 50.

Therefore, MPS = Change in saving/Change in income = 50/100 = 0.5

Hence, the answer is B.

Table 8.7 -Refer to Table 8.7.Given the Consumption Schedule in the Table