What is the Relationship between MPC and MPS class 12

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What is Marginal Propensity to consume

The ratio (proportion) of change in consumption expenditure to change in income, is called Marginal Propensity to consume (MPC).

Formula of Marginal Propensity to Consume

MPC = Change in Consumption Expenditure/Change in income

What is Marginal Propensity to Save

The ratio (proportion) of change in savings to change in income, is called Marginal Propensity to save (MPS).

Formula of Marginal Propensity to Save

MPS = Change in Savings/Change in income

Relationship between MPC and PMS

APS= Y/S

As the increase in income is either consumed or saved, the sum of MPC and MPS is supposed to be equal to 1. Thus, the higher the APC, the lower will be the APS and vice versa.

MPC + MPS = 1

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