Marginal Propensity to Consume

The Marginal Propensity to Consume (MPC) measures the proportion of extra income that is spent on consumption.

If an individual gains £10 and spends £7.50 then the MPC is 0.75.

MPC is always between 0 and 1.

The formula to calculate MPC is as follows:

MPC = Change in consumption / Change in income

Change in consumption = MPC * Change in income

Change in income = MPC * Change in consumption