MPC is the amount that consumption will increase (or decrease) for every increase (or decrease) in disposable income.
When income increases, those who benefit from it have a choice to either save or spend. If they spend (instead of save) 80% of their increase in income, their MPC would be 0.8 (and their MPS, marginal propensity to save, would be 0.2).
Marginal Propensity to Consume = Change in Consumption / Change in Income
Change in consumption is $900 in the same period where change in income is $1,500.
MPC = $900 / $1,500 = 0.60
Therefore, Marginal Propensity to Consume is 0.60.
- Wikipedia – Marginal Propensity to Consume – An explanation of MPC and how it is calculated.
- Khan Academy – MPC and multiplier – Part of a larger course on macroeconomics, this video describes the MPC.
- Houston Chronicle – The relationship between Marginal Propensity to Consume & Marginal Propensity to Save – A quick article on how MPC and MPS are linked.
- ACDCLeadership (YouTube) – Macro 3.9 – Multiplier Effect, MPC, and MPS (AP Economics) – An overview video of MPC.