Average propensity to consume

In economics, the average propensity to consume (APC) is the fraction of income spent. It is computed by dividing consumption by income, or $APC={\frac {C}{Y}}$ .

Sometimes, disposable income is used as the denominator instead, so $APC={\frac {C}{Y-T}}$ , where C is the amount spent, Y is pre-tax income, and T is taxes.

One minus the APC is the average propensity to save (APS).

The average propensity to consume differs from the marginal propensity to consume (MPC), which is the fraction of incremental (marginal) income that is spent. Average propensity can be more or less than MPC depending upon the latter's Intercept (If MPC curve rises through origin then MPC=APC).

See also