Question

Define marginal propensity to consume (MPC).

Answer 1

The marginal propensity to consume may be defined as the ratio of the change in consumption to the change in income. Algebraically it may be expressed as follows:

MPC = `(ΔC)/(ΔY)`

Where, ∆C = Change in Consumption; ∆Y = Change in Income

MPC is positive but less than unity, `0 < (ΔC)/(ΔY) < 1`.