Author Question: Define and explain how we calculate the marginal propensity to consume and the marginal propensity ... (Read 187 times)

c0205847 · **on:** Jun 29, 2018

Define and explain how we calculate the marginal propensity to consume and the marginal propensity to save.

What will be an ideal response?

Question 2

Refer to Figure 7-2. Marginal private benefit is represented by which curve?

A) D2
B) Supply
C) D1
D) All of the above represent marginal private benefit.

adf223 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The marginal propensity to consume is the proportion of an increase in disposable income that is consumed. In terms of a formula, the marginal propensity to consume, or MPC, can be calculated as C/YD, where means change in. The marginal propensity to save is the proportion of an increase in disposable income that is saved. In terms of a formula, the marginal propensity to save, or MPS, can be calculated as S/YD.

Answer to Question 2

C