What does MPC stand for in economics?

In economics, MPC stands for Marginal Propensity to Consume. It is a measure of the proportion of an increase in income that is spent on consumption, rather than saved. The MPC is calculated as the change in consumption (C) divided by the change in income (Y).

For example, if an individual's income increases by $100 and they spend $80 on consumption, the MPC would be calculated as follows:

MPC = (80 - 0) / (100 - 0) = 0.8

This means that the individual has a marginal propensity to consume of 0.8, or 80%. This means that for every $1 increase in income, they will spend $0.80 on consumption and save $0.20.

The MPC is an important concept in economics because it helps economists understand how changes in income can affect consumption and saving behavior. It is also used in the calculation of the multiplier effect, which is the impact of a change in spending on overall economic activity.