What is APS?
APC means Average Propensity to Save
It is Ratio of saving to corresponding level of income
Average Propensity to Save = Savings/ Income
APS = S/Y
Income | Consumption Expenses | Savings | APS |
Y | C | S | |
0 | 4000 | -4000 | - |
10000 | 12000 | -2000 | -0.20 |
20000 | 20000 | 0 | 0.00 |
30000 | 28000 | 2000 | 0.07 |
40000 | 36000 | 4000 | 0.10 |
50000 | 44000 | 6000 | 0.12 |
60000 | 52000 | 8000 | 0.13 |
Important Points about APS
APS Increase with level of Income
It is because as the income of people increase, income does not rise with same proportion
APS Can be Negative, 0 or Positive but it can't be 1 or more than 1
When is APS Negative?
It is negative in case of negative savings (dissavings)
It happens when consumption expenditure is more than income
When is APS = 0?
It happens when consumption expense is equal to income and there are zero savings
Can APS Be 1 or more than 1?
APS Can be 1 only IF
Savings = Income
and there is no consumption expenditure
This is not possible because there is autonomous consumption expenditure
Example
Suppose Income = 10000
Consumption Exp = 0
Saving = 10000 - 0 = 10000
In this case, APS = 10000/10000 = 1
This is not possible because consumption exp cannot be 0
Similarly APS > 1 is not possible because Savings cannot be more than income
Example
Suppose Income = 10000
Consumption Exp = -1000
Saving = 10000 - 0 = 11000
This is not possible as consumption exp cannot be negative
How to draw Graph of APS
On X Axis, We represent Income
On Y Axis, We Represent Savings
It can be seen that
Savings Curve is Positively Sloping
However it stats at Point S which is below the origin
At any point of Consumption curve, we can calculate APS
Suppose we are calculating at Point A
APC = Savings/Income
APS = OR/OY
NCERT Questions
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Question 1
What is APS?
State some important points.
View AnswerAPC means Average Propensity to Save
It is Ratio of saving to corresponding level of income
Average Propensity to Save = Savings/ Income
APS = S/Y
Important Points about APS
1. APS Increase with level of Income
It is because as the income of people increase, income does not rise with same proportion
APS Can be Negative, 0 or Positive but it can't be 1 or more than 1
2. When is APS Negative?
It is negative in case of negative savings (dissaving's)
It happens when consumption expenditure is more than income
3. When is APS = 0?
It happens when consumption expense is equal to income and there are zero savings