Chapter 4 Part 1 - AD,AS and Related Concepts

Class 12 NCERT
Macroeconomics

## 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

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

No questions in this part

### Other Books

#### Question 1

What is APS?

State some important points. 