If Your Income Increases by $1,500 and You Only Consume

question 17

Multiple Choice

If your income increases by $1,500 and you only consume $900 of it,your marginal propensity to consume would be equal to

• A) 600.00.
• B) 0.50.
• C) 0.75.
• D) 0.40.
• E) 0.60.

---

Definitions:

Indifference Curve

A graph representing different bundles of goods between which a consumer is indifferent, showing combinations that provide the same level of satisfaction.

Substitution Effect

A concept in economics describing the change in consumption resulting from a change in the price of one good relative to the price of other goods.

Giffen Goods

A type of good for which demand increases as the price increases, and falls when the price decreases, violating the basic law of demand in economics.

Law of Demand

A fundamental principle stating that all else being equal, as the price of a good increases, the quantity demanded of that good decreases, and vice versa.