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The marginal propensity to consume (MPC) is the proportion of additional consumption (dC) which will be taking place out of an increase in income (dY): MPC=dC/dY MPC is the slope of the consumption line. It is constant throughout reflecting a stable pattern of consumption in our society.
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If the income of the family increases by $1,000 and the family decides to buy an additional television worth $600 with that new income, the marginal propensity to consume is MPC = 600/1000 = .6 or 60%. |
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