APC + APS = 1
MPC + MPS = 1
lets understand it with the help of an example
Example 1
Suppose at 100 Income, Consumption is 75
Income increased to 120 and consumption became 90
Calculate Savings, APC, APS, MPC, MPS
Lets first calculate APC and APS
Income (Y)  Consumption Exp  Savings  APC (C/Y)  APS (S/Y)  APC + APS 
100  75  25  0.75  0.25  1 
It can be seen that APC+APS=1
Now, let's calculate MPC and MPS
Income (Y)  Consumption Exp  Savings  Increase in Income (Delta Y)  Increase in Consumption Exp (Delta C)  Increase in Savings (Delta S)  MPC (Delta C/Delta Y)  MPS (Delta S/Delta Y)  MPC + MPS 
120  90  30  20  15  5  0.75  0.25  1 
It can be seen that MPC+MPS=1
Example 2 Sandeep Garg Page 7.13
Suppose Income and Consumption are as follows
Income  Consumption  Savings 
0  20  20 
100  110  10 
200  200  0 
300  290  10 
400  380  20 
500  470  30 
600  560  40 
Calculate APC, APS, MPC, MPS
Answer
Example 2
If APC of an economy is 0.8, what should be saving at an income level of ₹ 2,000 crores?
APC = 0.8
Income (Y) = 2000
Find Savings?
View AnswerAPC + APS = 1
Here, APC = 0.8
0.8 + APS = 1
APS = 0.2
APS = Savings / Income
0.2 = Savings / 2000
Savings = 2000*0.2
Savings = 400
NCERT Questions
No questions in this part
Other Books
Question 1
From the following schedule, compute APC, APC MPC and MPS:
Income  200  250  300  350  400 
Saving  …  5  15  20  50 
Income  200  250  300  350  400 
Saving  …  5  15  20  50 
Consumption  200  245  285  330  350 
APC  1  0.98  0.95  0.94  0.875 
APS  0  0.02  0.05  0.06  0.125 
Change in C    45  40  45  20 
Change in S    5  10  5  30 
Change in Y    50  50  50  50 
MPC    0.9  0.8  0.9  0.4 
MPS    0.1  0.2  0.1  0.6 
Explanation

We need to calculate Consumption
Income = Savings + Consumption
Consumption = Income  Savings  APC = Consumption/ Income
 APS = Savings/ Income
 Calculate Change in Y, Change in C, Change in S
 MPC = Change in C/ Change in Y
 MPS = Change in S/ Change in Y
Question 2
If national income is Rs 50 crore and Saving Rs 5 crore, find out average propensity comsume.
When income rises to Rs 60 crores and saving to Rs 9 crore, what will be the average propensity
to consume and the marginal propensity to save?
View Answer1) Y = 50
S = 5
APC = ?
Y = C + S
50 = 5 + C
45 = C
APC = C/Y
APC = 45/50
APC = 0.9
2) Y = 60
Change in Y = 10
S = 9
Change in S = 4
APC = ?
MPS = ?
Y = C + S
60 = 9 + C
51 = C
APC = C/Y
APC = 51/60
APC = 0.85
MPS = Change in S/ Change in Y
MPS = 4/10
MPS = 0.4
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