Marginal Propensity To Consume - MPC


Marginal Propensity To Consume - MPC
A component of Keynesian theory, MPC represents the proportion of an aggregate raise in pay that is spent on the consumption of goods and services, as opposed to being saved.

Let's illustrate this with an example. Suppose you receive a bonus with your paycheck, and it's $500 on top of your normal annual earnings. You suddenly have $500 more in income than you did before. If you decide to spend $400 of this marginal increase in income on a new business suit, your marginal propensity to consume will be 0.8 ($400 divided by $500).


Investment dictionary. . 2012.

Look at other dictionaries:

  • propensity to consume — ▪ economics       in economics, the proportion of total income or of an increase in income that consumers tend to spend on goods and services rather than to save. The ratio of total consumption to total income is known as the average propensity… …   Universalium

  • Marginal propensity to import — The marginal propensity to import (MPM) refers to the change in import expenditure that occurs with a change in disposable income (income after taxes and transfers). For example, if a household earns one extra dollar of disposable income, and the …   Wikipedia

  • propensity — pro‧pen‧si‧ty [prəˈpensti] noun propensities PLURALFORM [countable] 1. a tendency to behave in a particular way: • The plastic bodied car s propensity to catch fire killed demand. 2. marginal propensity to consume ECONOMICS the relationship… …   Financial and business terms

  • propensity to save — ▪ economics       in economics, the proportion of total income or of an increase in income that consumers save rather than spend on goods and services. The average propensity to save equals the ratio of total saving to total income; the marginal… …   Universalium

  • Marginal concepts — In economics, marginal concepts are associated with a specific change in the quantity used of a good or service, as opposed to some notion of the over all significance of that class of good or service, or of some total quantity thereof.… …   Wikipedia

  • Average propensity to save — The average propensity to save (APS), also known as the savings ratio, is an economics term that refers to the proportion of income which is saved, usually expressed for household savings as a percentage of total household disposable income. The… …   Wikipedia

  • ПРЕДЕЛЬНАЯ СКЛОННОСТЬ К ПОТРЕБЛЕНИЮ ИЛИ СБЕРЕЖЕНИЮ — MARGINAL PROPENSITY TO CONSUME OR SAVEТа часть каждого дополнительно заработанного доллара, к рую потребитель использует для потребления в противовес сбережению. Т. о., предельная склонность к потреблению (ПСП) и предельная склонность к… …   Энциклопедия банковского дела и финансов

  • Progressive tax — A progressive tax is a tax imposed so that the tax rate increases as the amount subject to taxation increases. [ [http://www.merriam webster.com/dictionary/Progressive Webster] (4b): increasing in rate as the base increases (a progressive tax)] [ …   Wikipedia

  • Life-cycle Income Hypothesis — Italian American Economist Franco Modigliani, winner of Nobel Memorial Prize in Economics in 1985, originated the Life cycle Income Hypothesis base on Irving Fisher s model of inter temporal choice. In Modigliani s Life cycle Hypothesis, or LCH… …   Wikipedia

  • Trygve Haavelmo — Infobox Scientist name = Trygve Magnus Haavelmo image size = 180px birth date = birth date|1911|12|13|df=yes birth place = Skedsmo, Norway death date = death date and age|1999|07|26|1911|12|13|df=yes death place = Oslo, Norway nationality =… …   Wikipedia

  • Microfoundations — In economics, the term microfoundations refers to the microeconomic analysis of the behavior of individual agents such as households or firms that underpins a macroeconomic theory (Barro, 1993, Glossary, p. 594).[1][2] Most early… …   Wikipedia


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.