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Suppose that Jane’s income increases from $1700 per month to $2300. At the same time, her consumption changes from $1050 per month to $1250 month. What is Jane’s marginal propensity to consume? (Round your answer to two decimal places.) Your Answer:

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Answer:

0.3333 or 33.33%

Explanation:

The marginal propensity to consume is determined as the ratio between the monetary change in consumption to the change in income.

From $1050 to $1250, Jane increased her consumption by $200.

From $1700 to $2300, Jane's income increased by $600.

Her marginal propensity to consume is:

[tex]MPC=\frac{200}{600}=0.3333=33.33\%[/tex]

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