2. SavingsSavings
Savings is defined as the part of income whichSavings is defined as the part of income which
is not consumed because disposable income isis not consumed because disposable income is
either consumed or saved.either consumed or saved.
S = Y-CS = Y-C
where, S= Savings.where, S= Savings.
Y= Disposable income.Y= Disposable income.
C= Consumption.C= Consumption.
3. Why do people saveWhy do people save
money?money?
For emergencies.For emergencies.
For retirements.For retirements.
For a down payment for house.For a down payment for house.
For vacations and other luxuryFor vacations and other luxury
items.items.
For educationFor education
For new car.For new car.
4. Average Propensity toAverage Propensity to
SaveSave
Average propensity to save is the sum or theAverage propensity to save is the sum or the
portion of disposable income that is saved.portion of disposable income that is saved.
APS = S / YAPS = S / Y
where, S = Savings.where, S = Savings.
Y = Disposable income.Y = Disposable income.
5. Marginal Propensity toMarginal Propensity to
Save (MPS) :Save (MPS) :
The proportion of an aggregate rise in pay that aThe proportion of an aggregate rise in pay that a
consumer spends on savings rather then onconsumer spends on savings rather then on
the consumption good and service.the consumption good and service.
MPS =change in saving / change in income.MPS =change in saving / change in income.