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Average propensity to consume is a concept developed by John Maynard Keynes to analyze the consumption function, which is a formula where total consumption expenditures of a household consist of autonomous consumption and income ] multiplied by marginal propensity to consume. According to Keynes, the individual´s real income determines saving and consumption decisions.
Consumption function: C = C a + c Y {\displaystyle C={C_{a}}+cY}
The average propensity to consume is referred to as the percentage of income spent on goods and services. It is the proportion of income that is consumed and it is calculated by dividing total consumption expenditure by total income :
A P C = C Y = C a Y + c {\displaystyle APC={\frac {C}{Y}}={\frac {C_{a}}{Y}}+c}