Answer to Question #246610 in Economics for Juan

Question

Nthabiseng’s monthly disposable income increases from R3 000 to R3 400. As a result, her monthly savings increase from R400 to R560. This implies that her marginal propensity to consume is …

Answer 1

$$MPS=\frac{\varDelta S}{\varDelta Y}$$

$$MPS=\frac{160}{400}\times100=40$$

The marginal propensity to consume is increased by 40%.