How this calculator works
The marginal propensity to consume compares a change in household spending with the change in disposable income that prompted it. If a raise of $1,000 leads households to spend $800, the marginal propensity to consume is 0.8. It is a local slope, not an average: the average propensity to consume is total spending divided by total income, and it can differ sharply at low incomes where people spend savings or borrow. The marginal propensity to save is whatever part of the extra income is not consumed, so the two add to one for these two uses.
Formula
MPC = change in consumer spending / change in disposable income. Rearranged, the spending change is MPC × income change and the income change is spending change / MPC. MPS = 1 - MPC.
Worked example
Disposable income rising by $1,000 while spending rises by $800 gives an MPC of 0.8 and an MPS of 0.2. If the MPC were 0.9, a $500 income increase would raise spending by $450.
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Frequently asked questions
Can the marginal propensity to consume be above one?
For a single period it can if households spend more than the extra income by drawing down savings or borrowing. Over time and across the whole economy, values between zero and one are typical, which is why the input here is limited to that range.
Is MPC the same as the average propensity to consume?
No. APC is total consumption divided by total disposable income. MPC is the slope between two income levels, so it describes behaviour at the margin.
Why does the tool need a change in income rather than a level?
A single income and spending pair gives an average, not a marginal rate. Two comparable observations, or a stated change, are needed to identify how spending responds to income.