Consumption function #C=4141+0.78Y# was estimated by the UK during the period 1949-1975. What is the marginal propensity to consume during the period?

1 Answer
Shwetank Mauria
Dec 4, 2016

Marginal propensity to consume during the period was #0.78#.

Explanation:

The consumption function #C=4141+0.78Y#, which was estimated for the UK during the period 1949-1975, means that during the period while for an average consumer with no or zero income (i.e. #Y=0#) annual consumption #C# was #£4141#. for each additional income of #£1#, consumer spent #£0.78#.

Hence, the marginal propensity to consume during the period was #0.78#.

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