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Average Propensity To Consume

Average propensity to consume (PC) mat be defined as the ratio of total consumption spending to total disposable income. It can be computed for an individual household or for the economy as a whole.



Where   C = total consumption spending, and
              Y = total disposable income (i.e., income minus taxes).

For example, if at a given time the level of disposable income in an economy is Rs. 10,000 crores and consumption expenditure is Rs. 8,000 crores, the APC for the economy will be calculated as follows:

APC = Rs. 8,000 crores / Rs. 10,000 crores = 0.8 or 80%

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