If aggregate income is N500.00 and aggregate consumption is N400.00, this means that the average propensity to consume is?
Answer Details
The average propensity to consume (APC) is a measure of how much of their income people are spending. It is calculated as the ratio of total consumption to total income. In this case, the APC is calculated as follows:
APC = Aggregate Consumption / Aggregate Income
APC = N400.00 / N500.00
APC = 0.80
So, the average propensity to consume is 0.80. This means that for every N1.00 of income, people are spending N0.80 on consumption.