In economics, what is the percentage of an additional dollar of income that a person spends called?

The percentage of an additional dollar of income that a person spends is called the marginal propensity to consume.

It measures the change in consumption divided by the change in disposable income. For example, if households spend 80 cents of each additional dollar they receive, their marginal propensity to consume is 0.8, or 80 percent. The remaining share is the marginal propensity to save.

The concept became important in John Maynard Keynes’s analysis of aggregate demand. A higher marginal propensity to consume can make an initial change in income produce a larger short-run change in total spending, because one person’s spending can become another person’s income.

The marginal propensity to consume is different from the average propensity to consume, which compares total consumption with total income. It can also vary with income, expectations, taxes, debt, wealth, and whether the income change is temporary or permanent.