Principles of Macroeconomics / Unit 18 MAC 1724 short lesson, about 20 seconds
Marginal Against Average
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The idea
A marginal quantity concerns the next unit; an average concerns all units so far. The propensity to consume and the tax rate on the next dollar are both marginal.
In practice
A household can consume more than its income while its propensity stays below one.
Where people slip
A higher tax bracket raises the rate on income above the threshold only.
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