What is the difference between APC and MPC in business economics?


Quick Answer

Average propensity to consume, or APC, is the ratio of total consumption to total disposable income, whereas marginal propensity to consume, or MPC, is the ratio of change in consumption to the change in disposable income. The economist J.M Keynes developed the two concepts of APC and MPC in business economics.

Continue Reading

Full Answer

J.M. Keynes developed the concepts of APC and MPC to explain that savings and consumption decisions were governed by the real income of an individual. APC would be lower for higher incomes even if the MPC is constant. This indicates that APC declines as one's income becomes higher, even if there is no change in disposable income and consumption.

Learn more about Business Resources

Related Questions