CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.1% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

What is average propensity to consume?

Average propensity to consume

This is the proportion of income that households spend on goods and services, rather than savings. It's calculated by dividing spending by income.

Where have you heard about average propensity to consume?

It's sometimes used as an indicator of economic health, because periods of high consumer spending can boost the economy. Higher demand for goods and services results in more sales, leading to more jobs and helping to keep businesses running.

What you need to know about average propensity to consume.

It's expressed as a percentage, showing the proportion of disposable income, or income after tax, which is spent on consumer goods. It usually varies with levels of income. Households with a higher income tend to have a lower average propensity to consume. This is because they need to spend less of their cash on basic goods and services. Any change in the average propensity to consume is measured by marginal propensity to consume.

Find out more about average propensity to consume.

Check out our guide to average propensity to save to learn more about these economic indicators.

Related Terms

Latest video

Latest Articles

View all articles

Still looking for a broker you can trust?

Join the 610,000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading