ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Typically, the higher the income, the lower the MPC because as income increases more of a person’s wants and needs become satisfied; as a result, they save more instead. At low-income levels, MPC tends to be much higher as most or all of the person’s income must be devoted to subsistence consumption.

Detailed explanation-2: -How are MPC and MPS calculated? The marginal propensity to consume (MPC) is found by dividing the change in spending on consumption by the change in someone’s income. The marginal propensity to save (MPS) is similarly found by dividing the change in saving by the change in income.

Detailed explanation-3: -Key Takeaways. Marginal propensity to save (MPS) is an economic measure of how savings change, given a change in income. It is calculated by simply dividing the change in savings by the change in income. A larger MPS indicates that small changes in income lead to large changes in savings, and vice-versa.

Detailed explanation-4: -Marginal propensity to save is the portion of extra income that someone decides to save instead of consuming it on goods and services. Marginal propensity to consume is the exact opposite as it is the portion of extra income that someone decides to spend instead of saving.