The most common full form of APC is Average Propensity to Consume. In simple words, it refers to the total saved percentage of income. It is a great measure to understand where your money is going and manage spending habits. On the other hand, APS refers to Average Propensity to Save which reflects the total percentage of income saved.
Also Read: What’s the MAT Full Form?
Taking into view the broad economic sense, a high average propensity to consume or expenditure can be considered beneficial for the economy of a country. This is because household-related spending plays an essential role in keeping the economy strong. Similarly, low APC can be equally disadvantageous.
High APC shows that consumers are spending more on goods and services rather than saving their money. It creates a demand for goods and services which in turn facilitates economic and business growth. On the other hand, if people start to save more than spending, it can cause the downfall of several businesses and job losses.
Formula of APC
The propensity to consume is determined by dividing the average household consumption by the average household income. It is abbreviated as APC = C / DI where C stands for consumption and DI for Total Disposable Income. Additionally, it is graphically represented by the slope of the consumption function.
Also Read: What is the full form of EGOM?
Example of APC
To get a better understanding of APC, let us take an example. Imagine a household with a total income of $50,000 out of which the total consumption is of $25,000. To calculate its APC, all you have to do is:
APC = C / DI
APC = 25,000 / 50,000
APC = 0.5
This was all about the APC Full form. If you want to read more such interesting full forms, stay connected with Leverage Edu.