Suppose you get $100 for your birthday and you spend $75 on a new smartphone and save the remaining $25. The marginal propensity to consume or MPC is equal to 0.
What is marginal propensity to consume?
- Marginal propensity to consume (MPC) is measured because the portion of an increase in pay that a consumer would spend on goods and services as opposed to saving.
- Essentially, it's measuring how sensitive consumption in an economy is to increases in income.
- MPC is vital in economics because it illustrates the effect that increased government spending has on the economy.
- According to Keynesian economics, increased government spending should end in increased consumer income levels, ultimately leading to higher levels of increased spending.
- From a business perspective, it's critical to understand how government spending will impact demand for their company while knowing the MPC will help the company to adjust production according to demand.
To learn more about Marginal propensity to consume: https://brainly.com/question/19089833
#SPJ4
