Question

Which of below BEST defines the marginal propensity to consume?

A)The change in consumption divided by the change in income
B) The change in income divided by the change in consumption
C) The percentage change in income divided by the percentage change in consumption
D) The total consumption value divided by the total income value

Answer 1

The marginal propensity to consume is the change in consumption divided by the change in income. It represents the proportion of additional income that is spent on consumption.

Step-by-step explanation:

The marginal propensity to consume is defined as the change in consumption divided by the change in income. This means that for every additional unit of income earned, the proportion that is spent on consumption is the marginal propensity to consume.

For example, if the marginal propensity to consume is 0.8, it means that for every additional dollar earned, $0.80 will be spent on consumption.