A person making $35,000 and spending $30,800 has an average propensity to consume of 80%.

Question

Quizplus · Accepted Answer

The average propensity to consume (APC) measures the proportion of income that is spent on consumption. It is calculated by dividing consumption by income.

In this case, the person's consumption is $30,800, which is 88% of their income ($35,000). Therefore, the APC is 88%, not 80%.

80% would be the marginal propensity to consume (MPC), which measures the change in consumption resulting from a change in income.

A Person Making $35,000 and Spending $30,800 Has an Average