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प्रश्न
How is marginal propensity to consume different from marginal propensity to save?
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उत्तर
The consumption function’s complement is the propensity to save, sometimes known as the saving function. The saving function depicts the link between the degree of savings and income. Keynesian economics views saving (like consumption) as a function of income. The higher the degree of income, the greater the amount of savings. In a simplified two-sector economy, the portion of income not spent on consumption is saved. Algebraically, saving (S) can be defined as
S = Y − C
Because income is either spent or saved, there is a Siamese twins relationship between consumption and saving, which means that the part of income that is not consumed is saved, while the part that is not saved is utilized for consumption expenditure. As a result, if we understand the relationship between consumption and income, we can instantly determine the relationship between saving and income.
Like consumption, saving is an increasing function of the level of income, i.e., the amount of saving increases with an increase in the level of income.
Thus,
S = f (Y)
There are two savings ideas that are identical to the consumption concepts of APC and MPC. These are the ‘Average propensity to save’ (APS) and ‘Marginal propensity to save’ (MPS). The average propensity to save refers to the percentage of income that households want to save. It is calculated by dividing the total planned savings by total income.
Symbolically,
APS = `S/Y`
The marginal propensity to save compares the change in total desired saving to the change in income that caused it. The MPS is the change in total desired savings divided by the change in total income.
Symbolically,
MPS = `(DeltaS)/(DeltaY)`
Where ΔS refers to change in total desired saving and ΔY refers to change in income.
