If a household’s income increases by $1,000 and consumption increases by $800, what is the Marginal Propensity to consume (MPC)?[Fill in the blank]单项选择题
A
a. 0.2
B
b. 0.5
C
c. 0.8
D
d. 1.25

Question

If a household’s income increases by $1,000 and consumption increases by $800, what is the Marginal Propensity to consume (MPC)?[Fill in the blank]

BlackTom AI · Accepted Answer

MPC = change in consumption divided by change in income, so MPC = ΔC / ΔY.

1) Relevant knowledge points and concepts
- Marginal Propensity to Consume (MPC) measures how much consumption changes when disposable income changes: MPC = ΔC / ΔY.
- MPC typically lies between 0 and 1 (meaning part of an income increase is consumed and the rest saved); the complement is the Marginal Propensity to Save (MPS) where MPS = 1 − MPC.

2) Step-by-step reasoning
- Identify the changes given: income increases by $1,000 (ΔY = 1,000) and consumption increases by $800 (ΔC = 800).
- Apply the MPC formula: MPC = ΔC / ΔY.

3) Calculations with intermediate steps
- MPC = 800 / 1,000
- Simplify: divide numerator and denominator by 100 → MPC = 8 / 10
- Further simplify → MPC = 4 / 5 = 0.8
- As a percentage: 0.8 × 100% = 80%

4) Why the correct answer is correct
- The arithmetic directly yields 0.8 from the definition of MPC. That value means the household spends 80% of any additional dollar of income and saves the remaining 20% (MPS = 0.2).

5) Why the other options are incorrect
- a. 0.2 would imply consumption increased by only $200 given a $1,000 income rise (not the $800 stated).
- b. 0.5 would imply a $500 increase in consumption (not $800).
- d. 1.25 would imply consumption increased by $1,250 for a $1,000 income rise, which contradicts the given $800 and would mean spending more than the income increase.

6) Conclusion
- The computed MPC is 0.8, so the correct choice is c. 0.8, matching the provided answer.

If a household’s income increases by $1,000 and consumption increases by $800, what is the Marginal Propensity to consume (MPC)?[Fill in the blank]单项选择题

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