Asked Oct 15, 2019

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? 


Expert Answer

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:


Image Transcriptionclose


Step 2

Consumption = Income - Savings

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

When his i...


Image Transcriptionclose

ДС МРС AY $1300-$900 MРC $1500-$1000 $400 МРС %D $500 МРC 3D0.8


Want to see the full answer?

See Solution

Check out a sample Q&A here.

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.

Related Economics Q&A

Find answers to questions asked by student like you
Show more Q&A

Q: (Use for questions 1 - 3): Two soap producers, the Fortnum Company and the Maison Company, The payof...

A: The payoff matric is given below:


Q: the following table shows nominal GDP and an appropriate price index for a group of selected years. ...

A: The Real GDP can be calculated by the given equation.


Q: What variable is indeterminate?  a. increase in business taxes and an increase in the price of a com...

A: Hi, In case of a multipart question, i\'m required to answer the first three subparts. Lucky for you...


Q: Question #2 has three types: a, b, and they are in the two different pictures.

A: Part a) Linear pricing is when same price is charged to all consumers taking into consideration the ...


Q: The managers of Roosevelt's (a local upscale bar) are considering charging an admission fee on Thurs...

A: 1) Using just the beverage charge per unit:


Q: 1. A factual claim about how the world actually works   a. is a positive statement.   b. cannot be p...

A: Hey, Thank you for the question. According to our policy we can only answer upto 3 MCQs per session....


Q: Being that Japan is a mountanous island, what do they focus on?

A: Jap is a mountainous island which means that the geography of Jap is mountainous. There are numerous...


Q: A case study in this chapter discusses the federal minimum-wage law. Suppose the minimum wage is ...

A: The aforementioned given statement can be used to draw the labor market graph as follows:


Q: Que 1. In December, the price of Christmas trees rises and the quantity of trees sold also rises. Is...

A: Law of demand states that, if other things remaining the same as price of a commodity increases quan...