The income of an individual increases from N150 to N250 and his consumption rate increases from N100 to N150. Calculate the Marginal Propensity to Consume
Question 1 Report
The income of an individual increases from N150 to N250 and his
consumption rate increases from N100 to N150. Calculate the Marginal
Propensity to Consume
Answer Details
The Marginal Propensity to Consume (MPC) is the additional amount consumed as a fraction of additional disposable income.
Initial income = N150.
New income = N250.
Change in income = N250 – N150 = 100
Initial consumption = N100
New consumption = N150.
Change in consumption = N150 - N100 = N50.
MPC = Change in consumption ÷ Change in income .
= 50/100 = ½
MPC = 0.5
Initial income = N150.
New income = N250.
Change in income = N250 – N150 = 100
Initial consumption = N100
New consumption = N150.
Change in consumption = N150 - N100 = N50.
MPC = Change in consumption ÷ Change in income .
= 50/100 = ½
MPC = 0.5
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