Question

Chris earns $50,000 income in 2019, consumes $45,000 and saves $5,000. At the end of the year, he gets an unexpected bonus of $1187 and spends $383. What is his marginal propensity to consume?

Answer 1

Chris's marginal propensity to consume, which is the increase in consumer spending due to an incremental increase in income, is approximately 0.32 (or 32%). This is calculated by dividing the change in consumption ($383) by the change in income ($1187).