In the the case above, if the consumption function is: C = $500 + 0.75 × YD, from the equation, the The marginal propensity to consume is option C) 0.75.
The marginal propensity to consume which is MPC is the aspect of each extra money that is dollar of a household's income that is said to be used, consumed or spent.
Note that Consumer behavior in regards to saving or spending has a very vital impact on the economy of a country.
From the formula given, the breakdown is:
YD = disposable income.
Autonomous consumption = $500.
The marginal propensity to consume = 0.75.
Therefore, In the the case above, if the consumption function is: C = $500 + 0.75 × YD, from the equation, the The marginal propensity to consume is option C) 0.75.
See full question below
Suppose that the consumption function is: C = $500 + 0.75 × YD
(Scenario: Consumption Spending) The marginal propensity to consume is:
A) $500.
B) 0.
C) 0.75
D) 0.2.
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