The marginal propensity to consume is defined to be
A)the change in desired consumption divided by the change in saving.
B)the change in desired consumption divided by total disposable income.
C)the change in desired consumption divided by the change in disposable income.
D)total desired consumption divided by total disposable income.
E)total desired consumption divided by the change in disposable income.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is defined as the change in desired consumption divided by the change in disposable income. This means that for every additional dollar of disposable income, the MPC represents the proportion of that dollar that will be spent on consumption. Thus, the MPC is a key concept in determining the overall level of demand in an economy.

The Marginal Propensity to Consume Is Defined to Be