Average Propensity to Consume

Tax Glossary Definition

Average Propensity to Consume

Average Propensity to Consume (APC) – The proportion of total income that households spend on consumption rather than saving. It is calculated as the ratio of total consumption expenditure to total income and is used to analyze consumer spending patterns and formulate economic policies.

Example: If a household earns ₹5,00,000 and spends ₹4,00,000, its APC = 4,00,000 ÷ 5,00,000 = 0.8 (or 80%).

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