Question

Suppose income of an individual increases from ₹ 50,000 to ₹ 60,000. As a result, his consumption expenditure rises from ₹ 40,000 to ₹ 48,000. Marginal Propensity to Consume (MPC) in such a case would be ______.

विकल्प

• 0.8

• 0.5

• 0.75

• 0.6

Answer 1

Suppose income of an individual increases from ₹ 50,000 to ₹ 60,000. As a result, his consumption expenditure rises from ₹ 40,000 to ₹ 48,000. Marginal Propensity to Consume (MPC) in such a case would be 0.8.

Explanation:

MPC = `(Delta C)/(Delta Y)`

ΔC = New Consumption − Initial Consumption

= ₹ 48,000 − ₹ 40,000

= ₹ 8,000

ΔY = New Income − Initial Income

= ₹ 60,000 − ₹ 50,000

= ₹ 10,000

MPC = `(Delta C)/(Delta Y)`

= `(₹ 8,000)/(₹ 10,000)`

= 0.8