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 .
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 .