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From this, you can tell Megan's marginal propensity to consume is 0.75, and marginal propensity to save is 0.25.
What is marginal propensity to consume?
The marginal propensity to consume (MPC), a statistic that quantifies the idea that an increase in disposable income leads to an increase in personal consumer expenditure (consumption), is known as induced consumption. The portion of someone's disposable income that they are likely to spend on consumption is called their propensity to consume. The MPC is the percentage of additional income that a person spends on consumption. If the marginal propensity to consume is 0.65, for instance, a household will spend 65 cents of a dollar of additional disposable income and save 35 cents. The family can only afford to spend the extra dollar. For poorer people compared to wealthy people, the MPC is higher.
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