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What is APC?
APC means Average Propensity to Consume
It is Ratio of aggregate consumption expenditure to aggregate income
Average Propensity to Consume = Consumption Expenditure/Income
APC = C/Y
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Important Points about APC
APC Falls with level of Income
It is because as the income of people increase, expenditure do not rise with same proportion
When APC Is more than 1
It means Consumption Expenditure is more than Income
There are Dissavings in this case
When APC=1
It means Comsumption Expendiure = Income
It is Breakeven Point
When APC less than 1
It means Consumption Expenditure is less than Income
There is Savings in this case
APC Can never be 0
We know that APC = Consumption Exp/Income
APC Can be 0 only when Consumption expenditure is 0
Which is not possible because there is autonomous consumption expenditure
(There is minimum expenditure to be incurred even at 0 income)
Note
Lesser the APC, better it is for the economy
Developed Countries have lesser APC
Developing Countries have more APC
How to Show APC on Graph
On X Axis, We represent Income
On Y Axis, We Represent Expenditure
It can be seen that
Consumption Curve is Positively Sloping starting at Point C
(It increases with increase in income)
At any point of Consumption curve, we can calculate APC
Suppose we are calculating at Point A
APC = Consumption/Income
APC = ON/OY
NCERT Questions
No questions in this part
Other Books
Question 1
What is APC?
State some important points about APC.
View AnswerAPC means Average Propensity to Consume
It is Ratio of aggregate consumption expenditure to aggregate income
Average Propensity to Consume = Consumption Expenditure/Income
APC = C/Y
Important Points about APC
1. APC Falls with level of Income
It is because as the income of people increase, expenditure do not rise with same proportion
2. When APC Is more than 1
It means Consumption Expenditure is more than Income
There are Dissaving's in this case
3. When APC=1
It means Consumption Expenditure = Income
It is Breakeven Point
4. When APC less than 1
It means Consumption Expenditure is less than Income
There is Savings in this case
5. APC Can never be 0
We know that APC = Consumption Exp/Income
APC Can be 0 only when Consumption expenditure is 0
Which is not possible because there is autonomous consumption expenditure
(There is minimum expenditure to be incurred even at 0 income)
