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marginal propensity

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What does it mean to say that the marginal propensity to consume increases with income? Is this typically the case? Explain.

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The marginal propensity to consume (MPC) refers to the increase in consumption that occurs with an increase in disposable income. It is simply the increase in consumption for the individuals if the disposable income increases by $1.

The increase in MPC with income means that as the income increases the MPC increases. For example, if total disposable income of individual is $20000 and MPC is 0.60, it means that if ...

Solution Summary

The marginal propensity to consume (MPC) is fully defined.