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25 April, 11:12

Dora earns 50,000 a year at her johs. when she was given a raise of 5,000 her spending increased from 50,000 to 54,000 calvulate doras mpc and mps

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  1. 25 April, 12:00
    0
    Here her new income is 54000 which was increased from 50000. MPC = (54000-50000) / 5000 = 4000/5000 =.08 MPS = 1 - MPC = 1 - 0.8 = 0.2
  2. 25 April, 14:22
    0
    Given:

    ΔY = $5,000, the change in income

    ΔS = 50,000 - 54,000 = - 4,000, the change in savings.

    By definition,

    MPS (Marginal Propensity to Spend) is

    MPS = ΔS/ΔY = - 4000/5000 = - 0.8

    The relation between MPS and MPC (Marginal Propensity to Consume) is

    MPS + MPC = 1.

    Therefore

    MPC - 0.8 = 1

    MPC = 1.8

    Answer:

    MPS = 0.8

    MPC = 1.8
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