Meditations and Learnings

Meditations and Learnings

Marginal Propensity To Consume

Marginal propensity to consume (MPC) is the proportion of an aggregate raise in pay that a consumer spends on the consumption of goods and services, as opposed to saving it. For example, if your salary rose by a net £10,000 a year, and you spent £6,000 a year on consumer goods (saving £4,000), this would be an MPC of 0.6.
Higher income individuals have a lower MPC on average assumably because they have already satisfied most of their consumption needs.