Refer to the consumption schedule above. The marginal propensity to consume is:
A) .60
B) .75
C) .80
D) .20

Question

Refer to the consumption schedule above. The marginal propensity to consume is:
A) .60 
B) .75 
C) .80 
D) .20

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the slope of the consumption schedule, which is the change in consumption divided by the change in income. Looking at the table, when income increases from 100 to 200, consumption increases from 140 to 190, which is a change of 50. Therefore, the MPC is 50/100 or 0.5. Since the choices are given in percentage format, we need to multiply the MPC by 100 to get the answer of 75, which corresponds to choice B.

Refer to the Consumption Schedule Above