ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When the average propensity to consume is high, consumers are saving less and spending more on goods or services. This increased demand drives economic growth, business expansion, and broad employment. Low-income households are often seen as having a higher average propensity to consume than high-income households.

Detailed explanation-2: -The average propensity to consume and the average propensity to save always have a sum equal to one. The portion of your disposable income you spend and the portion you save add up to your total income.

Detailed explanation-3: -The ratio of total consumption to total income is known as the average propensity to consume; an increase in consumption caused by an addition to income divided by that increase in income is known as the marginal propensity to consume.

Detailed explanation-4: -Average propensity to consume is decreasing Since autonomous consumption in positive (Ca>0), the ratio of APC falls with increase in disposable income because with increase in income the proportion of consumption expenditures is decreasing as it creates smaller part of income.