Question
Asked Oct 15, 2019
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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? 

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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:

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ДС МРС- ΔΥ

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Step 2

Consumption = Income - Savings

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

When his i...

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

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