Free Marginal Propensity Calculator
Calculate marginal propensity to consume (MPC), marginal propensity to save (MPS), and changes in consumption and savings from changes in disposable income.
You can also estimate consumption changes and calculate simplified Keynesian spending and lump-sum tax multipliers.
Your Results
Your calculation details will appear here.
Enter values and click Calculate.
The multiplier estimates use a simplified closed-economy Keynesian model with constant MPC, fixed prices, no induced taxes or imports, and no crowding out. They are not forecasts.
How to Use the Marginal Propensity Calculator
This calculator helps you understand how changes in disposable income are allocated between consumption and savings.
Step 1: Select a Calculation Mode
Choose Income and Consumption Changes when you already know both changes.
Choose Before-and-After Values when you have income and consumption data from two different periods.
Choose Income and Savings Changes when consumption data is unavailable but changes in savings are known.
Choose Predict Consumption to estimate how consumption might change using an assumed MPC.
Step 2: Enter Your Values
Enter all required values in the relevant fields.
Use disposable income rather than gross income. Disposable income generally means income available after personal taxes.
Step 3: Click Calculate
The calculator displays MPC, MPS, income and consumption changes, savings changes, and applicable simplified multipliers.
Step 4: Review the Results
An MPC of 0.80 means that consumption changes by $0.80 for every $1 change in disposable income under the measured relationship or assumption.
The remaining $0.20 represents the marginal propensity to save.
Marginal Propensity to Consume Formula
Marginal propensity to consume measures the change in consumption associated with a change in disposable income.
The formula is:
MPC = Change in Consumption ÷ Change in Disposable Income
Or:
MPC = ΔC ÷ ΔYd
Where:
- ΔC = Change in consumption
- ΔYd = Change in disposable income
- MPC = Marginal propensity to consume
Marginal Propensity to Save Formula
Marginal propensity to save measures the share of a change in disposable income allocated to savings.
MPS = Change in Savings ÷ Change in Disposable Income
When disposable income is divided between consumption and savings:
MPC + MPS = 1
Therefore:
MPS = 1 – MPC
Calculate Consumption Change
If MPC and the income change are known:
Change in Consumption = MPC × Change in Disposable Income
For example, an MPC of 0.80 and an income increase of $1,000 produce an estimated consumption increase of $800.
Calculate Savings Change
Change in Savings = MPS × Change in Disposable Income
You can also calculate savings directly:
Change in Savings = Change in Income – Change in Consumption
These formulas assume disposable income is allocated between consumption and savings.
Spending Multiplier Formula
The simple Keynesian spending multiplier describes the total equilibrium output change associated with an initial change in autonomous spending under a highly simplified economic model.
Spending Multiplier = 1 ÷ (1 – MPC)
Since MPS = 1 – MPC:
Spending Multiplier = 1 ÷ MPS
Example: MPC of 0.80
Multiplier = 1 ÷ (1 – 0.80)
Multiplier = 5
In this model, an initial $1,000 increase in autonomous spending would correspond to a $5,000 increase in equilibrium output.
This is a theoretical model result, not a prediction of actual economic performance.
Simple Tax Multiplier Formula
For an autonomous change in lump-sum taxes:
Tax Multiplier = -MPC ÷ (1 – MPC)
For MPC = 0.80:
Tax Multiplier = -0.80 ÷ 0.20 = -4
Under the model, a $1,000 increase in lump-sum taxes would reduce equilibrium output by $4,000.
These simple multipliers are provided only when MPC is between 0 and 1, excluding 1.
At MPC = 1, the denominator is zero, so the simplified multiplier has no finite value.
Marginal Propensity Calculation Example
Suppose a household’s disposable income increases by $1,000.
Its consumption expenditure increases by $800 during the same period.
Step 1: Calculate MPC
MPC = $800 ÷ $1,000
MPC = 0.80
Step 2: Calculate MPS
MPS = 1 – 0.80
MPS = 0.20
Step 3: Calculate Savings Change
Savings Change = $1,000 – $800
Savings Change = $200
Step 4: Calculate the Simple Spending Multiplier
Multiplier = 1 ÷ 0.20 = 5
Final Result
The household spends 80% of the additional income and saves 20%.
The simplified Keynesian spending multiplier is 5 under the assumptions described above.
MPC and MPS Comparison Table
The following table assumes an increase of $1,000 in disposable income.
| MPC | MPS | Consumption Change | Savings Change | Spending Multiplier |
|---|---|---|---|---|
| 0.20 | 0.80 | $200 | $800 | 1.25 |
| 0.40 | 0.60 | $400 | $600 | 1.67 |
| 0.60 | 0.40 | $600 | $400 | 2.50 |
| 0.80 | 0.20 | $800 | $200 | 5.00 |
| 0.90 | 0.10 | $900 | $100 | 10.00 |
| 1.00 | 0.00 | $1,000 | $0 | Not finite |
The multiplier column uses the simplified formula 1 ÷ (1 – MPC). The 1.00 case has a zero denominator.
Frequently Asked Questions
What is marginal propensity to consume?
Marginal propensity to consume measures the change in consumption divided by the change in disposable income.
An MPC of 0.80 means consumption changes by $0.80 for every $1 change in disposable income.
How do you calculate MPC?
Divide the change in consumption by the change in disposable income.
For example, $800 divided by $1,000 gives an MPC of 0.80.
What is marginal propensity to save?
Marginal propensity to save measures the share of a disposable income change allocated to savings.
When income is divided between consumption and savings, MPS equals 1 minus MPC.
What is the difference between MPC and MPS?
MPC measures the consumption response to an income change.
MPS measures the savings response. Together, they equal one under the standard accounting identity.
Can MPC be greater than 1?
Yes. An observed consumption increase can exceed the corresponding disposable income increase, potentially through borrowing or reduced savings.
The calculator displays such observed values but does not apply the standard simple multiplier formula outside its conventional range.
Can MPC be negative?
Yes. Observed consumption and disposable income can move in opposite directions.
A negative measured MPC may arise in particular datasets or periods. It does not fit the conventional simple multiplier assumptions.
What happens when MPC equals 1?
When MPC equals one, MPS equals zero. All of the change in disposable income is allocated to consumption.
The simple spending multiplier is undefined because its denominator is zero.
What is the difference between MPC and APC?
MPC divides the change in consumption by the change in disposable income.
Average propensity to consume (APC) divides total consumption by total disposable income.
How does MPC affect the spending multiplier?
In the simple Keynesian model, a higher MPC produces a larger spending multiplier when MPC is between zero and one.
Actual economic outcomes depend on taxes, imports, capacity constraints, monetary policy, and other factors.
Can I calculate MPC when income decreases?
Yes. Enter a negative change in disposable income and the corresponding change in consumption.
The calculator divides the consumption change by the income change. Both negative values can produce a positive MPC.
Related Calculators
Educational estimates only. Changes in consumption and income alone do not establish causation. The simplified multipliers should not be treated as empirical economic forecasts.