Question

Define marginal propensity to consume

Answer 1

Marginal Propensity to Consume (MPC) is the ratio of change in consumption (ΔC) to change in income (ΔY) i.e.`MPC=(DeltaC)/(DeltaY)`

Example:

`DeltaY=Rs500`

`DeltaC=Rs100`

`MPC=c=(DeltaC)/(DeltaY)`

       `=100/500=0.2`