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
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