Consumption expenditure thousands of) (dollars Disposable income thousands) (of dollars 225 200 300 300 375 400 450 500 According to the data in the above table, what is the marginal propensity to :consume? Select one

Economics Dec 29, 2020

Consumption expenditure thousands of) (dollars Disposable income thousands) (of dollars 225 200 300 300 375 400 450 500
According to the data in the above table, what is the marginal propensity to :consume? Select one .a. 0.75 .b. 75 .c. 1 .d. 100 IE

Expert Solution

Marginal Propensity to Consume (MPC) = Change in Consumption /Change in Disposable Income

MPC = (300-225)/(300-200)

= 75/100

MPC = 0.75

MPC = (375-300)/(400-300)

= 75/100

MPC = 0.75

MPC = (450-375)/(500-400)

= 75/100

MPC = 0.75

MPC is constant over the years and it is 0.75.

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