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Questions
Differentiate between marginal propensity to save and average propensity to save.
Distinguish between MPS and APS.
Differentiate between average propensity to save and marginal propensity to save.
Distinguish Between
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Solution
| Marginal propensity to save | Average propensity to save | |
| 1. | MPS is the ratio of change in total desired saving to change in total income. | The average propensity to save is the proportion of income that households want to save. |
| 2. | APS = `S/Y` | MPS = `(ΔS)/(ΔY)` |
| 3. | MPS measures the change in saving due to a change in income. | APS measures the overall savings out of total income. |
| 4. | MPS lies between 0 and 1. | APS can be between 0 and 1, or even more than 1 (if saving exceeds income). |
| 5. | It is a marginal concept (concerned with change). | It is an average concept (concerned with totals). |
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