Question

Write short note on Average Propensity to Consume.

Answer 1

The average propensity to consume (APC) refers to the percentage of income spent on goods and services rather than on savings. A person can determine the percentage of income spent by dividing the average household consumption, or what is spent, by the average household income, or what is earned. The inverse of the average propensity to consume is the average propensity to save (APS).

Answer 2

Short note on Average Propensity to Consume is as follows:

• The fraction of income is known as the Average Propensity to Consume.
• Income divides consumption to calculate APC.
• The formula of average propensity to consume is APC= C/DI, when DI is disposable income and C is the consumption expenditures' ratio.
• In case of low level income, income is lesser than consumption that means APC is greater than 1. This happens just because income is zero when consumption is positive.