Average propensity to consume

With consumption ratio, the share of consumption expenditure, disposable income of private households is called. A private household may be income for the purchase of goods issue (consumption) or to forego consumption ( saving). The savings and the reduced consumption simultaneously leads to capital formation.

Statistically, a distinction between the average and the marginal propensity to consume. The average propensity to consume is the total consumption expenditure to total income in relation ( (w / p * N) / Y). The marginal propensity to consume indicates what proportion of the last earned income unit for consumption is expended, so the consumption ratio is between 0 and 1, the corresponding remaining portion is called marginal propensity to save, it indicates what percentage of income used for saving.

The consumption ratio is the quotient of consumption expenditure and disposable income.

• National Accounts
• Macroeconomics
• Private Financial Planning