Question

Dora earns 50,000 a year at her johs. when she was given a raise of 5,000 her spending increased from 50,000 to 54,000 calvulate doras mpc and mps

Answer 1

Given:
ΔY = $5,000, the change in income
ΔS = 50,000 - 54,000 = - 4,000, the change in savings.

By definition,
MPS (Marginal Propensity to Spend) is
MPS = ΔS/ΔY = -4000/5000 = -0.8

The relation between MPS and MPC (Marginal Propensity to Consume) is
MPS + MPC = 1.
Therefore
MPC - 0.8 = 1
MPC = 1.8

Answer:
MPS = 0.8
MPC = 1.8

Answer 2

Here her new income is 54000 which was increased from 50000. MPC = (54000-50000)/5000 = 4000/5000 =.08 MPS = 1 - MPC = 1- 0.8 = 0.2