Table 8.7
-Refer to Table 8.7.Given the consumption schedule in the table above, the marginal propensity to consume is
A)0.4.
B)0.5.
C)0.6.
D)0.75.
E)0.8.

Question

Table 8.7 
-Refer to Table 8.7.Given the consumption schedule in the table above, the marginal propensity to consume is
A)0.4. 
B)0.5. 
C)0.6. 
D)0.75. 
E)0.8.

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the increase in consumption resulting from a one-unit increase in income. It is calculated as the change in consumption divided by the change in income. Looking at the consumption schedule in the table, we can see that for every $10 increase in income, consumption increases by $6. Therefore, the MPC is 6/10 or 0.6.

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