Let's say that a consumption function is given as c = 50 + 0.75y. Find the marginal propensity to consume
The marginal propensity to consume (MPC) is the change in consumption divided by the change in disposable income.
In this case, the consumption function is c = 50 + 0.75y, where c is consumption and y is disposable income.
To find the MPC, we need to take the derivative of the consumption function with respect to disposable income y:
MPC = dc/dy
MPC = d/dy (50 + 0.75y)
MPC = 0 + 0.75
Therefore, the marginal propensity to consume in this case is 0.75. This means that for every additional unit of disposable income, 0.75 units will be spent on consumption.