# In year one,  Adam earns \$1,000 and saves \$100. In year 2, Adam gets a \$500 raise so that he earns a total of \$1,500. Out of that \$ 1,500, he saves \$ 200. What is Adam's MPC out of his \$500 raise?

Question
337 views

In year one,  Adam earns \$1,000 and saves \$100. In year 2, Adam gets a \$500 raise so that he earns a total of \$1,500. Out of that \$ 1,500, he saves \$ 200. What is Adam's MPC out of his \$500 raise?

check_circle

Step 1

MPC or marginal propensity to consume is the change in consumption of a person due to change in his income. The formula for calculating MPC is:

Step 2

Consumption = Income - Savings

When his income is \$1000, his savings = \$100. So, his consumption is \$900 (\$1000 - \$100).

When his i...

### Want to see the full answer?

See Solution

#### Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in