Principles of Macroeconomics / Unit 9 MAC 0807 short lesson, about 20 seconds
The Marginal Propensity to Consume
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The idea
The marginal propensity to consume is the share of an extra dollar of disposable income that gets spent. It is the slope of the consumption function.
In practice
With a propensity of 0.75, an extra thousand dollars of disposable income raises spending by 750.
Where people slip
The propensity is about the next dollar, not the dollars already spent.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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