Question

Income 10000, autonomous consumption 500, consumption expenditure 8000 calculate mps

Answer 1

Answer:

Given

Income = 10,000

Autonomous consumption {C bar}= 500

Consumption expenditure (C)= 8,000

we know,

C.= C bar + CY

8000 = 500 + c (10,000)

C = 0.75

Now we know that MPS = 1 - MPC

s=1-C

s=1-0.75

s=0.25

hence, the marginal propensity to consume to save is 0.25