Question

Suppose that Jane’s income increases from $1700 per month to $2300. At the same time, her consumption changes from $1050 per month to $1250 month. What is Jane’s marginal propensity to consume? (Round your answer to two decimal places.) Your Answer:

Answer 1

0.3333 or 33.33%

Step-by-step explanation:

The marginal propensity to consume is determined as the ratio between the monetary change in consumption to the change in income.

From $1050 to $1250, Jane increased her consumption by $200.

From $1700 to $2300, Jane's income increased by $600.

Her marginal propensity to consume is:

`MPC=(200)/(600)=0.3333=33.33\%`