According to the income and consumption schedules shown above, the marginal propensity to consume (MPC) is best defined as:

• A. Total consumption divided by total income
• B. The change in consumption divided by the change in income
• C. The change in income divided by the change in consumption
• D. The ratio of savings to income

Answer: (B)

Verified step by step guidance

1. Understand that the Marginal Propensity to Consume (MPC) measures how much consumption changes when income changes. It reflects the additional consumption resulting from an additional unit of income.
2. Identify the formula for MPC, which is the ratio of the change in consumption (\(\Delta C\)) to the change in income (\(\Delta Y\)). This can be written as: \[ MPC = \frac{\Delta C}{\Delta Y} \]
3. Look at the income and consumption schedules to find two points where income and consumption values are given. Calculate the change in consumption (\(\Delta C\)) by subtracting the earlier consumption value from the later consumption value.
4. Similarly, calculate the change in income (\(\Delta Y\)) by subtracting the earlier income value from the later income value.
5. Divide the change in consumption by the change in income using the formula above to find the MPC. This value tells you how much consumption increases for each additional unit of income.