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Marginal Propensity to Save (MPS)

Find the share of each extra dollar of income that households save rather than spend, complementing MPC in economic analysis.

Change in Savings (ΔS)

Change in Income (ΔY)

Initial Savings

Final Savings

Initial Income

Final Income

Marginal Propensity to Consume (MPC)

MPS Results

Marginal Propensity to Save

Implied MPC

Savings Rate

Calculation Details:

Economic Analysis

MPS Interpretation

Economic Implications

Understanding MPS

Key Concepts

Marginal Propensity to Save (MPS): The fraction of additional income that is saved rather than consumed.

Formula: MPS = ΔS / ΔY (Change in Savings / Change in Income)

Relationship: MPS + MPC = 1 (always equals 1)

Range: MPS values range from 0 to 1

Economic Significance

• Higher MPS indicates greater propensity to save

• Lower MPS suggests higher consumption tendency

• Important for fiscal policy multiplier effects

• Affects economic growth and investment levels

• Varies across income levels and demographics

Example Calculation

If income increases by $1,000 and savings increase by $200, then MPS = $200 ÷ $1,000 = 0.2 or 20%. This means 20% of additional income is saved, while 80% is consumed (MPC = 0.8).

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