Question

If the total income increases from Rs. 5,000 crores to Rs. 6,000 crores and saving Increases from Rs. 1,000 crores tot 1,500 crores, calculate MPC.

Answer 1

Marginal Propensity to consume refers to the percentage change in consumption for every one rupee of change in the income.

Change in income= Rs. 1,000 crores and change in savings= Rs. 500 crores.

change in consumption= 1000-500 = Rs. 500 crores.

MPC= change in consumption/ change in income

= 500/1000= 0.5