of average propensity to consume Graphically is APC represented by the slope of consumption function which starts from the origin (it holds for the long run: C=cY, Ca=0). If the consumption function does not go through the origin, APC for certain income is given as the slope of the line connecting the origin and a certain point on consumption curve for a given income. Average propensity to consume and average propensity to save (APS) According to Keynes´s consumption and saving (S) functions and their relation to disposable income, income consists of consumption expenditure and saved income: Y=C+S=Ca+cY-Ca+sY, where s represents marginal propensity to save (MPS). By dividing the equation by income we get that 1=APC+APS. Thus APC=1-APS. APC is a complement to average propensity to save. So a change in average propensity to consume also determines propensity to save. This means that the entire income of a household must be saved or spent. With increasing income households can save more (APC is decreasing). Average propensity to consume and marginal propensity to consume (MPC) APC>MPC holds in the short run for positive income. When income increases, APC and MPC, both fall. However, the decline in APC is smaller than the decline in MPC. And the consumption function behaves accordingly to Keynesian assumptions. In the long run, because income rises faster than consumption, with increasing income, APC converges to MPC. So MPC=APC in the long run and it is constant for Ca=0. (Mathematically from the consumption function: C=cY, after dividing it by income we get APC=(cY)/Y=c=MPC.) APC in the short run and long run Keynesian theory of APC, where APC>MPC, empirically works only in the short term, because it would predict “secular stagnation” (infinity long depression) in the long run, which did not occur. This and the Kuznets riddle were the reasons for further development of consumption function. The Kuznets riddle asks why APC in the short run is decreasing while in the long run APC remains constant. One of the first explanations, which was wrongly almost forgotten, was provided by Duesenberry, who built on the findings of social psychology. The two best-known explanations were provided in the 1950s by Modigliani and Friedman, who built on the results of Irving Fisher's theory of intertemporal consumer choice. Life cycle hypothesis According to life cycle hypothesis, presented by Franco Modigliani, the income and consumption are dependent on stage of life. The reason for that