Average propensity to consume
In economics, the average propensity to consume is the fraction of income spent. It is computed by dividing consumption by income, or
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.
One minus the APC is the average propensity to save.
The average propensity to consume differs from the marginal propensity to consume, which is the fraction of incremental income that is spent. Average propensity can be more or less than MPC depending upon the latter's Intercept.
