Concept of Propensity to Save or Saving function

The Propensity To Save Schedule Which For The Sake Of Brevity Is Called The Propensity To Save Shows Relation Between Saving And Disposable Income At Varying Levels Of Incomes S = F(Y) The Propensity To Save Schedule Comes From Subtracting^, Consumption  From Income At Each Level Of Income Since Saving Represents The Difference Between The 45⁰ Guideline And The Consumption Function It May Be Positive Or Negative The Propensity To Save Schedule Can Easily Be Derived From The Propensity To Consume Schedule In Our Example Given Earlier The Propensity To Consume Is As Follows

Income                     Rs. (billion)	50,	100,	140,	•  200	300
Expenditure               Rs. (billion)	50,	70,	100,	140,	200

The Propensity To Save Schedule Can Easily Be Derived By Subtracting The Amount Of Consumption From The Corresponding Amount Of Income The Saving Schedule Thus Is As  Follows:

Income	Rs. (billion)	50,	100,	140,	200	300
Save	Rs. (billion)	0,	30,	40,	60,	100

CONCEPTS OF PROPENSITY TO SAVE.
There Are Two Concepts Of Propensity To Save:
(i) Average Propensity To Save. (ii) Marginal Propensity To Save.
(i)  Average Propensity To Save: Average Propensity To Save Is The Percentage Of Income Saved At A Given Level Of Income (Aps) The Average Propensity To Save At Any Point Can Be Found By Dividing Saving By Income For Instance If The Disposable Income Is Rs 100 Billion And Expenditure Rs 80 Billion On Consumption Goods Then The Saving Win Be Equal To Rs 20 Billion The Average Propensity To Save Will Be  2 The Average Propensity To Save .Can Also Be Found By Subtracting Average Propensity To Consume From 1 In The Above Example The Average Propensity To Consume Is
80  •
- .8. So The Average Propensity To Save Will Be 1 – .8 = .2
1000
(ii)  Marginal Propensity to save: Marginal Propensity To Save Is The Ratio Of Change In Saving To Change In Income The Mps Measures The Change In Saving
Generated By A Change In Income.

MPS – Change in saving

Change In Income
It Is Also Found Out By Substracting Marginal Propensity To Consume Form I. Thus MPS
= I – MPC. The Concepts Of Propensity To Save And Marginal Propensity To Save Are
Illustrated Below:

The Saving Schedule

isposable Income   (Y)	Consumption Expenditure (C)	Net Saving (S)	Average Propensity to Save                 (1 (1 - PC = PS)	Marginal Propensity to Save                     (1 - MPC = MPS)
A 1000	1100	$100	1 -1 = 1	1 - 9 = 0.1
B 2000	2000	$000	1 - 1 = 0	1 - 6 = 0.4
C 3000	2600	$400	1 - 0.86 = 0.14	1 - 5 = 0.5
D 4000	3100	$900	1 - 0.77 = 0.23	1 - 3 = 0.7
E 5000	3400	$1600	1 - 0.68 = 0.32	1 - 2 = 0.8
F 6000	3600	$2400	1 - 0.6 = 0.4	1 - 1 = 0.9
G 7000	3700	$3300	1 - 0.53 = 0.47

It Is Quite Clear From The Above Saving Schedule That As The Income
Increases The Average Propensity To
Save And Marginal Propensity To Save Also Increases And As Income Decreases The Average Propensity To Save And The Marginal Propensity To Save Also Decrease Income Is Measured Along The X Axis _Z^7-6 3000 And Saving Along The Y Axis At Point
A  The Consumption Expenditure Rs 2000 1 100 Billion Against The Disposable Income Of Rs 1000 Billion The Expenditure Is More  Than The Disposable Income There Is Dis‑
Saving of Rs. 100 billion. The excess P.\
cm    (3)
o o o o o
o          o
Expenditure Of Rs. 100 billion is met
Either Out Of Accumulated Saving Or By Borrowing. When income increases to Rs. 2,000 billion, the expenditure also increases to Rs. 2,000 billion. At point
A  consumption Is Exactly Equal To Expenditure B Is The Break Even Point Where C = Y From B Onward Upto G Point Saving Goes On Increasing With The Increase In Disposable Income A G Thus Is The Saving Curve Which Has Risen With The Rise In Income It May Here Be Noted Saving As Used By Keynes In Consumption Function Is Real Saving And Income Real Disposal Income The Saving Function Like The Consumption Function Remains Stable In The Short Period