If C = 400 and Y = 1000, then what is the average propensity to consume?

Correct option is C

The Average Propensity to Consume (APC) is the ratio of consumption (C) to income (Y).

The formula is:

APC =$$\frac{C}{Y}$$​

Given,
C = 400
Y = 1000

Thus,
APC = $$\frac{400}{1000}$$​ = 0.4

So, the average propensity to consume is 0.4.

Information Booster

• Average Propensity to Consume (APC): It indicates the proportion of total income that is spent on consumption. A higher APC suggests that a larger portion of income is spent rather than saved.
• Income (Y): Represents the total money received by an individual or household in a given period.
• Consumption (C): Refers to the total spending by individuals or households on goods and services.