The marginal propensity to consume measures the ratio of change in consumption to change in income. It indicates the proportion of additional income that is being used for consumption. The marginal propensity to consume is measured by the formulas,
MPC = ΔC/ΔY
where,
MPC = Marginal Propensity to consume
Δ = Δ(delta) denotes the change, so that
ΔC = Change in consumption expenditure and
ΔY = Change in income.
Thus, to calculate the marginal propensity to consume, we find out the amount of change in income (ΔY) and also the amount of change in consumption (ΔC). Then by dividing the amount of change in consumption by the amount of change in income, we get the figure for the marginal propensity to consume.
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