Average propensity to consume
- Average propensity to consume
Average propensity to consume (APC) is the percentage of income spent. To find the percentage of income spent, one needs to divide consumption by income, or. In an economy in which each individual consumer saves lots of money, there is a tendency of people losing their jobs because demand for goods and services will be low. Thus saving as a leakage is an advantage from the savers' point of view, while for the economy as a whole it is a considerable disadvantage.
Sometimes, disposable income is used as the denominator instead, so. ::: Where C is the amount spent, Y is pre-tax income, and T is taxes
The inverse is the average propensity to save (APS).
Average propensity to consume (APC) is the percentage of income people desire to spent.
It is key to note that Average Propensity to Consume (APC) is very different from Marginal Propensity to Consume (MPC). These two values are often confused in economics.
*Marginal propensity to save
*Marginal propensity to consume
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