at your future job, you get an unexpected raise from $50,000 a year to $75,000 a year. with the increased income, you decide to increase your consumption from $30,000 a year to $40,000 a year. calculate your marginal propensity to consume

The marginal propensity to consume is a metric that quantifies induced consumption, which is the idea that an increase in disposable income leads to an increase in personal consumer spending.

The propensity to consume is the percentage of disposable income that individuals spend on consumption. The marginal propensity to consume (MPC) is defined as the proportion of a pay increase that a consumer spends on goods and services rather than saving.

The marginal propensity to consume (MPC) is the proportion of a raise that is spent on goods and services rather than saved. A multiplier is an economic input that increases the impact of another variable.

Therefore,

We are calculating the marginal propensity to consume here (MPC).

Income Change = New Income - Old Income

Income Change = $75,000 - $50,000

Income Change = $25,000

Consumption Change = New Consumption - Old Consumption

Consumption change = $40,000 - $30,000

Consumption change = $10,000 in

Change in Consumption / Change in Income = Marginal Propensity to Consume

Marginal propensity to consume = $10,000 / $25,000

Marginal propensity to consume = 2/5

Marginal propensity to consume = 0.4

Therefore, the Marginal propensity to consume is 0.4.

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