Question

Average propensity to consume is equal to

• A. \( \frac{\Delta C}{\Delta Y} \)
• B. \( S+C \)
• C. \( \frac{C}{Y} \)
• D. \( \frac{S}{Y} \)

Hint:

Remember the difference: "Average" (APC) uses total values (\(C/Y\)), while "Marginal" (MPC) uses changes in values (\(\Delta C/\Delta Y\)).

Answer 1

The Correct Option is C

The Average Propensity to Consume (APC) is the ratio of total consumption (C) to total income (Y). It measures the proportion of total income that is spent on consumption. The formula is: \[ APC = \frac{\text{Total Consumption}}{\text{Total Income}} = \frac{C}{Y} \] Let's look at the other options:

\( \frac{\Delta C}{\Delta Y} \) is the formula for the Marginal Propensity to Consume (MPC).
\( \frac{S}{Y} \) is the formula for the Average Propensity to Save (APS).