Consider a hypothetical economy. The income in the economy rose from 4000 to 5000 and as a result consumption expenditure rose from 3500 to 4000. What will be the value of Marginal Propensity to Consume?

0.4 0.5 0.7 0.8

0.5

MPC = \(\frac {∆C}{∆Y}\) Here, ∆C = 4000 -3500 = 500 and ∆Y = 5000-4000 = 1000 So , MPC = \(\frac {500}{1000}\) = 0.5