Average Propensity to Consume
Average propensity to consume (APC) is the percentage of disposable income which households intend to spend on goods and services.
It is a statistic that tells what fraction of income households are willing to spend and what fraction they intend to save.
|Average propensity to consume (APC) =||Total Consumption Expenditure|
|Total Disposable Income|
Mark has total income for FY 2012 of $100,000 and he is liable to pay taxes of $20,000. If his total expenditure for FY 2012 are $60,000. Find his average propensity to consume.
Mark's total disposable income is $80,000 ($100,000 of total income minus taxes of $20,000). Average propensity to consume equals total consumption expenditure of $60,000 divided by total disposable income (which is $80,000). This gives us an average propensity to consume (APC) of 75%. This tells that Mark intends to consume 75% of his disposable income and save 25%.
Written by Obaidullah Jan