Marginal propensity to consume – definition

The marginal propensity to consume (mpc) is the extra consumer spending arising from an increase in national income, expressed as:

C
Y

If we take the following figures for GPD and consumption we can calculate the mpc:


 20182019
GDP$800bn$840bn
Consumption$500bn$525bn

This gives us:


 20182019
GDP + $40bn
Consumption + $25bn

Therefore, the mpc is:

$25bn/$40bn; = 0.625