Alright, so now that we're familiar with the consumption function, let's think about one more feature here and it's going to be called the marginal propensity to consume. Just like we saw, as we have more candy stored, right? What we saw is we got a big bonus at work, we got a lot of extra money and what were we expecting to do? We're expecting to consume more, maybe buy ourselves a gift, but we are not going to spend all of that bonus. We might save some of it as well. So, what's going to happen is that as we add disposable income, some of it's going to be consumed. Some of it's going to be saved and that's the idea of the marginal propensity to consume is actually how much we are going to consume and how much we are going to save. So, the marginal propensity to consume, remember when we talk about this word marginal, what's marginal meant all throughout this class? Class? Marginal. Adding one more, right? When we add one more. How do things change when we add one more? So in this case, we're going to see how much consumption changes when disposable income changes, right? How much is consumption going to change when disposable income changes?
So, let's before we fill this in, let's look at our formula here. So the marginal propensity to consume, we call it MPC. It's the change in consumption. The little delta there meaning change. So how much more consumption when we change disposable income? So let's say we increase disposable income by 1. How much is consumption going to increase, right? So, we could expect maybe we have 1 more dollar of disposable income. We earn 1 more dollar. Maybe we'll spend $0.75 of that dollar and we'll save the rest of it, right? It could be any number. In this case, let's say it's $0.75, right? So we would have a marginal propensity to consume of 0.75, okay? So it's going to have to be something between 0 and 1, right? We're going to have $1 of income and we're either going to spend some proportion of it in between 0 and 1. So in this case, we're spending 75% of it and of course, the rest of it we would be saving. So that's what we have in the marginal propensity to save. That's the amount your savings change. How much savings change when disposable income changes. So you're going to get an extra dollar of disposable income and in this case, how much are you going to save, right? So for each dollar of disposable income, well, you're going to save some of it, right? So naturally, if you didn't consume it, you're going to save it. So in this case, we'll say you save 25% of that extra money that you get.
So let's go back up to the graph. What does that tell us about the graph? Think let's think about the marginal propensity to consume and the consumption function. What does it tell us? Remember, the marginal propensity to consume is the change in consumption over the change in disposable income. So for every extra dollar that we get in disposable income as we move right on this graph, how much are we going up? What does that sound like? What's one of those key words about a line? Notice the consumption functions a line here. What do you think the marginal propensity to consume is? It's the slope of the marginal propensity to consume is? It's the slope of the line, right? How much is it going to go up? How much is our consumption going to go up as we get extra disposable income, right? So that's what we see here for each dollar of extra disposable income. So as we move from this point out here let me do that a little better. I'll do it in black actually. New color. So as we move here and now we move out, how much are we moving up? Right? So that is our marginal propensity to consume and notice that it's constant along our consumption function because we have a line and lines have a constant slope. Okay? So that's what we're going to be dealing with here is that the slope is that marginal propensity to consume. Cool? Let's take a pause here and we're going to dive into these topics of marginal propensity to consume and save a little more on the next page.