[lz221476]

I am a little confused about this question:

An individual receives an income of $3000 per month, and spends $2500. An increase in income of $500 per month occurs, and the individual spends $2800. the individual’s marginal propensity to save is:

a.0.8

b.0.4

c.0.6

d.0.2

The right answer is 0.4. I thought it was 0.6. 1/MPS*(2800-2500)=500 => MPS=0.6

My questions: Is individual’s MPS different from economy’s MPS? what is my mistake?

Thanks for help!

[lz221476]

thx!

[Author]

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