Calculate your marginal propensity to consume. Enter your change in monthly income and change in consumption to calculate your MPC. This calculator can also determine either the change in consumption or income given the other variables.

MPC Calculator

Calculate marginal propensity to consume using the core formula MPC = ΔC / ΔYd, or use the consumption function C = a + MPC × Yd.

MPC & MPS
Consumption Function
Choose the unknown and enter the other two values. Disposable income is used here because MPC is based on the change in consumption divided by the change in disposable income.
Use the linear consumption function C = a + MPC × Yd to estimate total consumption from autonomous consumption, MPC, and disposable income.

MPC Formula

The following formula is used to calculate MPC. 

MPC = CC / CI
  • MPC is the marginal propensity to consume
  • Where CC is a change in consumption ($)
  • CI is change in income ($)

To calculate MPC, divide the change in consumption by the change in income.

Understanding MPC can help determine the necessary lifestyle changes that are unnecessary when receiving an increase in income.

MPC Definition

MPC stands for marginal propensity to consume. This is a term that refers to the increase in consumption or spending when an increase in income occurs.

How to calculate MPC

The following example is a step-by-step guide on how to calculate MPC.

  • The first step in solving the MPC is to understand what variables need to be known from the formula above. In this case, the variables are changed in consumption (how much extra you spend) and change in income (how much extra income you receive).
  • The next step is to calculate the change in income. This would be equal to the net income – the old income. For this example, we will say the change in income was $10,000.00.
  • Now, we must determine what the change in consumption is. This would be more difficult in a real-world situation. To determine this you can dig into all of the extra purchases made since receiving the increase in income. For these examples, we will assume $5,000.00.
  • Finally, enter all of the information into the formula above. From this we find the MPC to be .50 or 50%. In general anything above 50% is bad and anything below 50% is considered normal.

MPC is also very dependent on current financial situations. If someone is struggling financially their MPC is likely to be higher due to their need for paying outstanding bills.

FAQ

What is MPC?

MPC is short for marginal propensity to consume and it is a measure of a person’s increase in spending with an increase in income.