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Marginal Propensity to Consume

Marginal Propensity to consume (MPC) relates to a change in total consumption expenditure to a change in the total disposable income.



Where  Δ C  = Change in total consumption expenditure and
              Δ Y = Change in total disposable income.

Suppose, the total disposable income in an economy increases from Rs. 10,000 crore to Rs. 20,000 crore, and the consumption expenditure rises from Rs. 8,000 crore to Rs. 15,000 crore, then the MPC will be calculated as follows:

MPC = ΔC/ΔY  =  Rs. 7,000 crore / Rs. 10,000 crore  = 0.7 or 70%

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