The ratio of a change in consumption to a change in income is the:
A) consumption function.
B) propensity to consume.
C) average propensity to consume.
D) extra propensity to consume.
E) marginal propensity to consume.

Question

Quizplus · Accepted Answer

The ratio of a change in consumption to a change in income is known as the marginal propensity to consume (MPC). It represents the proportion of an increase in income that is spent on consumption. The other options - consumption function, propensity to consume, average propensity to consume, and extra propensity to consume - are not correct definitions for this ratio.

The Ratio of a Change in Consumption to a Change