The marginal propensity to consume (MPC) refers to the increase in personal consumer spending (consumption) that occurs with an increase in disposable income (income after taxes and transfers). For example, if a household earns one extra dollar of disposable income, and the marginal propensity to consume is 0.65, then of that dollar, the family will spend 65 cents and save 35 cents. It has been suggested that this article or section be merged with consumption (economics). ... Disposable income is the amount of an individuals total income left after taxes, plus any transfer payments (grants) received from the government or elsewhere. ...
Mathematically, the marginal propensity to consume (MPC) function is expressed as the derivative of the consumption (C) function with respect to disposable income (Y). In mathematics, the derivative is defined as the instantaneous rate of change of a function. ...
In other words, the marginal propensity to consume is measured as the ratio of the change in consumption to the change in income, thus giving us a figure between 0 and 1. The MPC can be more than one if the subject borrowed money to finance expenditures higher than their income. One minus the MPC equals the marginal propensity to save. In economics, the marginal propensity to save refers to the increase in saving (non-purchase of current goods and services) that results from an increase in income. ...
It is affected by factors such as the prevailing interest rate and the general level of consumer surplus that can be derived from purchasing. Supply curve shift Consumer surplus or Consumers surplus (or in the plural Consumers surplus) is the economic gain accruing to a consumer (or consumers) when they engage in trade. ...
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