MPC is the ratio of total consumption to total income, representing the propensity to consume across all income levels.

If MPC is 0.8, households spend 8% of any additional income on consumption.

If MPC is 0.5 and a household’s income increases by $10,000, the consumption is expected to increase by $5,000.

MPC describes the size of the effect of one additional unit

of income on consumption.