Definition of Marginal Propensity to Consume (MPC) is:

Question

Question

This question was previously asked in

Bihar Police SI Memory Based Paper (Held on: 17th Dec 2023 Shift 2)

Answer 1

The correct answer is \(\Delta C/\Delta Y\).

Key Points

Marginal propensity to consume refers to the change in consumption with respect to the change in income.
When there is an increase in income it reflects in better purchasing power of a consumer.
The change in income not only affects consumption but also induces changes in savings.
The proportion of consumption depends upon the income levels and corresponding necessities of the consumer.
It is used widely in economics to calculate the required additional production for the increased demand(consumption).

Additional Information

The marginal propensity to consume is equal to ΔC / ΔY, where ΔC is the change in consumption, and ΔY is the change in income. If consumption increases by 80 cents for each additional dollar of income, then MPC is equal to 0.8 / 1 = 0.8.