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If income increases from 900 R

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If income increases from 900 R.O. to 1300 R.O. as result consumption also increases from 700 R.O. to 850 R.O. then calculate marginal propensity to consume (MPC).

O a. 0.375

O b. None O c 0.275 O d. 0.475

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The MPC is computed as follows:

= Change in consumption / Change in Income

= (850 R.O. - 700 R.O.) / (1300 R.O. - 900 R.O.)

= 150 R.O. / 400 R.O.

= 0.375

So, the correct answer is option a.

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