#### Occupational Health and Safety, Canadian Edition

15th Edition
by David L. Goetsch, University of West Florida and Oskaloosa-Walton Eugene Ozon, Algonquin College
1035 Solutions 49 Chapters 1457 Studied ISBN: 0133450244 5 (1)

#### Chapters 28: DQ 1

DISCUSSION QUESTIONS

1. Precisely how do the MPC and the APC differ? How does the MPC differ from the MPS? Why must the sum of MPC and the MPS equal 1?

#### Step-By-Step Solution

DISCUSSION QUESTIONS

1. Precisely how do the MPC and the APC differ? How does the MPC differ from the MPS? Why must the sum of MPC and the MPS equal 1?

Answer: MPC refers to changes in spending and income at the margin. Here we compare a change in consumer spending to a change in income: MPC = change in C / change in Y. APC is an average whereby total spending on consumption (C) is compared to total income (Y): APC = C/Y.

When your income changes there are only two possible options regarding what to do with it: You either spend it or you save it. MPC is the fraction of the change in income spent; therefore, the fraction not spent must be saved and this is the MPS. The change in the dollars spent or saved will appear in the numerator and together they must add to the total change in income. Since the denominator is the total change in income, the sum of the MPC and MPS is one.