<Tr> <Td> 180 </Td> <Td> 170 </Td> </Tr> <P> Here Δ C = 50 (\ displaystyle \ Delta C = 50); Δ Y = 60 (\ displaystyle \ Delta Y = 60) Therefore, M P C = Δ C / Δ Y = 50 / 60 = 0.83 (\ displaystyle (\ mathit (MPC)) = \ Delta C / \ Delta Y = 50 / 60 = 0.83) or 83% . For 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 / $500 (\ displaystyle \ $400 / \ $500)). </P> <P> The marginal propensity to consume is measured as the ratio of the change in consumption to the change in income, thus giving us a figure between 0 and 1 . The MPC can be more than one if the subject borrowed money or dissaved to finance expenditures higher than their income . The MPC can also be less than zero if an increase in income leads to a reduction in consumption (which might occur if, for example, the increase in income makes it worthwhile to save up for a particular purchase). One minus the MPC equals the marginal propensity to save (in a two sector closed economy), which is crucial to Keynesian economics and a key variable in determining the value of the multiplier . </P> <P> In a standard Keynesian model, the MPC is less than the average propensity to consume (APC) because in the short - run some (autonomous) consumption does not change with income . Falls (increases) in income do not lead to reductions (increases) in consumption because people reduce (add to) savings to stabilize consumption . Over the long - run, as wealth and income rise, consumption also rises; the marginal propensity to consume out of long - run income is closer to the average propensity to consume . </P>

The marginal propensity to consume (mpc) is equal to the ratio of