Question

the apc can be defined as: multiple choice income/consumption change in income/change in consumption change in consumption/change in income consumption/income

Answer 1

The Average Propensity to Consume (APC) is the ratio of consumption to income, which decreases as disposable income increases, representing a smaller fraction of income being consumed.

Step-by-step explanation:

The Average Propensity to Consume (APC) can be defined as the consumption divided by income. When there's an increase in disposable income, consumption increases, but typically by a smaller amount, reflecting a marginal propensity to consume that is less than 1. This means that as disposable income rises, the fraction of income consumed declines, indicating a decline in the APC. This concept is tied to an individual's opportunity set, which represents all possible combinations of consumption that one can afford given their income and the prices of goods. Understanding the MPC, which is the fraction of additional income used for consumption, is also essential as it complements the saving behavior of individuals (MPC + MPS = 1).