Homework Answers
Answer
Marginal propensity to consume(MPC) =Change inn consumption /change
in disposable income
=(500-420)/(500-400)
=0.80
the MPC is 0.80
the saving increases by $20 as the change in income is 100 and
consumption is 80 so remaining is saving
saving increases by $20
MPS=1-MPC=1-0.8
MPS=0.20
marginal propensity to consume is 0.20
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