Total consumption is $1,800 when income is $2,000, and total consumption increases to $2,600 when income is $3,000. What is the marginal propensity to consume?
A)0.8
B)0.5
C)0.2
D)1.25

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated by the change in consumption divided by the change in income. Here, the change in consumption is $2,600 - $1,800 = $800, and the change in income is $3,000 - $2,000 = $1,000. Therefore, MPC = $800 / $1,000 = 0.8.

Total Consumption Is $1,800 When Income Is $2,000, and Total