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Determination of Income and Employment — Economics STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceEconomicsDetermination of Income and Employment4 Marks
Question
Distinguish between average propensity to consume and average propensity to save. What is the relation between the two?
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Answer

Average Propensity to Consume (APC) is the ratio of total consumption to total income, i.e., $\text{APC}=\frac{\text{C}}{\text{Y}}.$
Whereas Average Propensity to Save (APS) is the ratio of total savings to total income, i.e., $\text{APS}=\frac{\text{S}}{\text{Y}}.$

The relationship between APC and APS is as follows:

APC + APS = 1
APC = 1 - APS
APS = 1 - APC

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