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# Marginal and average propensity

by | Aug 18, 2021 | Assignment Help

Provide a 5 pages analysis while answering the following question: Explain the difference between the marginal propensity to consume (MPC) and the average propensity to consume (APC) and show how one helps to explain the size o. Prepare this assignment according to the guidelines found in the APA Style Guide. An abstract is required. For ?x?mpl?, if ? hous?hold ??rns on? ?xtr? doll?r of dispos?bl? incom?, ?nd th? m?rgin?l prop?nsity to consum? is 0.65, th?n of th?t doll?r, th? f?mily will sp?nd 65 c?nts ?nd s?v? 35 c?nts. M?th?m?tic?lly, th? m?rgin?l prop?nsity to consum? (MPC) function is ?xpr?ss?d ?s th? d?riv?tiv? of th? consumption (C) function with r?sp?ct to dispos?bl? incom? (Y). It is c?lcul?t?d ?s th? ch?ng? in consumption ?xp?nditur?, DC, divid?d by th? ch?ng? in dispos?bl? incom?, DYD, th?t brought it ?bout.In oth?r words, th? m?rgin?l prop?nsity to consum? is m??sur?d ?s th? r?tio of th? ch?ng? in consumption to th? ch?ng? in incom?, thus giving us ? figur? b?tw??n 0 ?nd 1. Th? MPC c?n b? mor? th?n on? if th? subj?ct borrow?d mon?y to fin?nc? ?xp?nditur?s high?r th?n th?ir incom?. On? minus th? MPC ?qu?ls th? m?rgin?l prop?nsity to s?v?. It is ?ff?ct?d by f?ctors such ?s th? pr?v?iling int?r?st r?t? ?nd th? g?n?r?l l?v?l of consum?r surplus th?t c?n b? d?riv?d from purch?sing.1Tot?ling, ?conomists oft?n sp??k of th? m?rgin?l prop?nsity to s?v? (MPS), which is th? fr?ction of ?xtr? incom? th?t p?opl? s?v?. Giv?n th?t p?opl? ?ith?r s?v? or consum? ?ddition?l incom?, th? sum of th? m?rgin?l prop?nsity to s?v? ?nd th? m?rgin?l prop?nsity to consum? should ?qu?l on?. Th? v?lu? of th? m?rgin?l prop?nsity to consum? should b? gr??t?r th?n z?ro ?nd l?ss th?n on?. ? v?lu? of z?ro would indic?t? th?t non? of ?ddition?l incom? would b? sp?nt. ?ll would b? s?v?d. ? v?lu? gr??t?r th?n on? would m??n th?t if incom? incr??s?d by \$1.00, consumption would go up by mor? th?n ? doll?r, which would b? unusu?l b?h?vior.

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