To calculate the marginal propensity to consume (MPC), we use the following formula:
\[ MPC = \frac{\Delta C}{\Delta Y} \]
Where:
- \(\Delta C\) is the change in consumption
- \(\Delta Y\) is the change in income
From the information provided:
- Initial income (Y1) = R5,500
- Final income (Y2) = R3,000
- Initial consumption (C1) = R2,400
- Final consumption (C2) = R1,100
Now we can calculate the changes:
\[ \Delta C = C2 - C1 = 1,100 - 2,400 = -1,300 \] \[ \Delta Y = Y2 - Y1 = 3,000 - 5,500 = -2,500 \]
Now we can plug these values into the MPC formula:
\[ MPC = \frac{-1,300}{-2,500} = \frac{1,300}{2,500} = 0.52 \]
Thus, the marginal propensity to consume is 0.52.