JAMB Economics 2023 Paper

Concept:The marginal propensity to consume (MPC) measures how much consumption increases when disposable income increases.Explanation:MPC is the ratio of the change in consumption to the change in income:$$MPC = \frac{\Delta C}{\Delta Y}.$$In the consumption function $C = a + cY_d$, the coefficient $c$ represents the MPC.The consumption function is drawn with consumption on the vertical axis and income on the horizontal axis.Therefore, its slope is equal to $c$, which is the same as the MPC.MPC normally lies between $0$ and $1$.So $\frac{\Delta C}{\Delta Y}$, the slope of the consumption function, and the coefficient $c$ are all correct ways of describing the MPC.Answer:All the given descriptions are correct: MPC is $\frac{\Delta C}{\Delta Y}$, the slope of the consumption function, and the coefficient $c$ in $C = C_0 + cY_d$.