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    Question

    According to the Keynesian Consumption Function, if an

    individual's income increases from ₹50,000 to ₹70,000 and their consumption increases from ₹40,000 to ₹55,000, what is the value of the Marginal Propensity to Consume (MPC)? 
    A 0.25 Correct Answer Incorrect Answer
    B 0.33 Correct Answer Incorrect Answer
    C 0.75 Correct Answer Incorrect Answer
    D 1.33 Correct Answer Incorrect Answer
    E 1.27 Correct Answer Incorrect Answer

    Solution

    MPC = C hange in Consumption / Change in Income = (55,000 – 40,000) / (70,000 – 50,000) = 15,000 / 20,000 = 0.75   This means for every additional ₹1 earned, the individual spends 75 paise.

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