Marginal propensity to consume (MPC) is an economic concept that measures how much of an additional increase in disposable income people spend on consumption. It shows the relationship between a change in income and the resulting change in consumer spending. MPC is calculated by dividing the change in consumption by the change in disposable income.

For example, if a person's disposable income increases by $1,000 and they spend an additional $800, their MPC is 0.8. This means they spend 80% of their additional income and save the remaining 20%. Generally, MPC ranges between zero and one, although it can vary depending on individual circumstances and economic conditions.

MPC is important in macroeconomics because consumer spending represents a major component of aggregate demand. When people have a high MPC, a larger portion of additional income is spent, potentially increasing demand for goods and services. When MPC is lower, more of the additional income is saved, which can reduce the immediate effect of income increases on consumption.

MPC also plays an important role in the Keynesian spending multiplier. A higher MPC generally produces a larger multiplier because each round of additional income generates more consumer spending. Governments and economists may therefore consider MPC when analysing the potential effects of changes in government spending, taxation, or household income.

Several factors can influence MPC, including income levels, consumer confidence, household debt, interest rates, expectations about future income, and economic uncertainty. Understanding marginal propensity to consume helps explain how changes in income can influence household spending and broader economic activity.