How this calculator works
The average propensity to consume, or APC, is total consumption divided by total disposable income over a period. It answers a simple question: of every dollar a household receives after tax, how much is spent? The remainder is the average propensity to save, or APS, which equals one minus the APC. The measure is an average, so it is not the same as the marginal propensity to consume, which describes how much of the next dollar of income is spent. Average and marginal rates can move in opposite directions: a household that spends a declining share of a rising income has a falling APC but may still spend most of any extra dollar. The APC can exceed one in a period when a household draws down savings or borrows. It can also be calculated for a whole economy using national accounts, where consumption and disposable income are published aggregates. This calculator works with any consistent pair of currency amounts.
Formula
APC = consumption / disposable income. APS = 1 - APC. Saving = disposable income - consumption. To solve for consumption: consumption = APC x disposable income. To solve for income: disposable income = consumption / APC.
Worked example
A household with $60,000 of disposable income that spends $45,000 has an APC of 0.75, or 75%. Its APS is 0.25 and it saves $15,000. If another household has the same $45,000 of consumption but an APC of 0.90, its disposable income is $45,000 / 0.90 = $50,000 and it saves $5,000.
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Frequently asked questions
Is APC the same as the marginal propensity to consume?
No. APC is the average share of all income that is spent. The marginal propensity to consume is the share of an additional dollar that is spent. A household can have an APC of 0.75 and a marginal propensity of 0.4, meaning it spends three quarters of its income overall but only 40 cents of each extra dollar.
Can the APC be greater than one?
Yes. If consumption exceeds disposable income, the household is dissaving, drawing on past savings or borrowing. The APS is then negative.
What counts as disposable income?
Income after income tax and mandatory social contributions. Transfer payments such as benefits count as part of income. In national accounts, the definition is set by the statistical agency and may include imputed items, so use consistent figures.
Why calculate APC for a whole country?
It describes how much of national income is spent on goods and services rather than saved. Central banks and finance ministries watch it because consumption is the largest component of demand in most economies.