Distinguish between APS and MPS. The value of which of these two can be negative and when?
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| S. No. |
Average Propensity to Save (APS)
|
Basis
|
Marginal Propensity to Save (MPS)
|
| 1. |
It refers to the ratio of saving (S) to the corresponding level of income (Y) at a point of time.
|
Meaning
|
It refers to the ratio of change in savings $(\Delta\text{S})$ to change in total income $(\Delta\text{Y})$ over a period of time.
|
| 2. |
APS can be less than zero when there are dis-savings, i.e. till consumption is more than national income.
|
Value less than zero
|
MPS can never be less than zero as change in savings can neverbe negative, i.e., change in consumption can never be more than the change in income.
|
| 3. |
$\text{APS}=\frac{\text{S}}{\text{Y}}$
|
Formula
|
$\text{MPS}=\frac{\Delta\text{S}}{\Delta\text{Y}}$ |
| S. No |
National Income
|
Consumption
|
Saving
|
APS
|
| 1. |
10
|
20
|
-10
|
-1
|
| 2. |
20
|
25
|
-5
|
$\frac{-5}{20}=\frac{-1}{4} =-0.25$
|
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