Marginal propensity to consume (MPC)

Marginal Propensity to Consume (MPC) is an economic concept that measures how much additional income a person is likely to spend rather than save. For example, if someone receives an extra $100 and spends $75 of it, their MPC is 0.75. It helps economists understand the relationship between income changes and consumer spending, influencing economic policies and forecasts. A higher MPC indicates people tend to spend more of any extra income, which can stimulate economic growth, while a lower MPC suggests they save more, possibly leading to slower economic activity.