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The willingness to use a proportion of income (Y) for consumption (C) is known as average propensity to consume (APC): APC=C/Y As income increases, the average propensity to consume decreases. This is indeed observable in the fact that wealthy individuals consume a smaller proportion of their income than to poorer people who may in fact be force to receive money from others.
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If the income of a family is $50,000 and that family spends $45,000 per year, the average propensity to consume is APC = 45,000/50,000 = .9 or 90%. |
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