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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Business

Cain

19 February, 18:30

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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Answers (2)

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Camille Logan · Answer 1

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

Sylvia Harding · Answer 2

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