The income of an individual increases from N150 to N250 and his consumption rate increases from N100 to N150. Calculate the Marginal Propensity to Consume

  • A 2
  • B 0.4
  • C 1
  • D 0.5
jamb 2015economics

The correct answer is D. 0.5

The Marginal Propensity to Consume (MPC) is the additional amount consumed as a fraction of additional disposable income.

Initial income = N150.

New income = N250.

Change in income = N250 – N150 = 100

Initial consumption = N100

New consumption = N150.

Change in consumption = N150 - N100 = N50.

MPC = Change in consumption ÷ Change in income .

= 50/100 = ½

MPC = 0.5

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