marginal propensity

Meanings

• noun

  The responsiveness of an economy or an individual to a change in income. It represents the ratio of the change in consumption to the change in income.

  - "The marginal propensity to consume in the US is currently estimated to be around 0.7."
  - "An increase in income will lead to an increase in consumption according to the marginal propensity to consume."

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Variants

List of all variants of marginal propensity that leads to same result
propensities , propensity

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Etymology

origin and the way in which meanings have changed throughout history.

The term 'marginal propensity' is derived from the economic concept of marginal analysis, which focuses on the impact of small changes on economic outcomes.

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Trivia

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1. The marginal propensity to consume is often denoted by the symbol 'mpc'.

2. In the context of an individual, the marginal propensity to consume is a measure of how much of an additional income an individual saves or spends.

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Related Concepts

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1. Marginal Propensity to Save: The ratio of the change in saving to the change in income. It is the complement of marginal propensity to consume.

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Culture

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Marginal propensity has been a significant concept in macroeconomics since the early 20th century, and its understanding is crucial for analyzing the behavior of an economy.

How to Memorize "marginal propensity"

1. visualize
   

   - Visualize a graph showing the relationship between income and consumption. The slope of the line represents the marginal propensity to consume.

2. associate
   

   - Associate the term 'marginal propensity' with the concept of analyzing the impact of small changes on economic outcomes.

3. mnemonics
   

   - Use the mnemonic 'Marginal Propensity to Consume, Makes People Spend More Comfortably' to remember the concept.

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