Calculate your marginal propensity to consume. Enter your change in monthly income and change in consumption to calculate your MPC.
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. It is a simple ratio of change in consumption to change in income by the following formula:
MPC = Change in Consumption/Change in Income
How to calculate MPC
Let’s look at an example of how to calculate MPC. Lets assume you receive an increase of $2000.00 per month in income. A nice bump to be sure. Then because of this raise you decide you can start spending more, and end up consuming $1,100.00 extra per month.
Through the formula above, you would end up with a MPC of 1,100/2000= .55.
This is just above the recommended MPC of .50
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