Average propensity to save
Also called: APS · Topic: Aggregate Demand, Income Determination and the Multiplier · NCERT: Class 12, Ch 4 "Determination of Income and Employment"
Meaning
The average propensity to save (APS) is the share of total income that is saved. APS = S/Y, where S = Y − C. Because C + S = Y, it always holds that APC + APS = 1. When consumption is more than income, saving is negative (dissaving), so APS is also negative. APS usually rises as income rises, because richer households can save a larger share of what they earn.
Example
Take C = 100 + 0.8Y. At Y = 500, S = 0, so APS = 0. At Y = 1,000, S = 100, so APS = 0.10. At Y = 2,000, S = 300, so APS = 0.15.
Don't confuse with
- Marginal propensity to save (MPS): MPS = ΔS/ΔY is the share of extra income that is saved, and MPC + MPS = 1. APS is based on total saving and total income, not on changes.
Related concepts
- Consumption function
- Autonomous consumption
- Induced consumption
- Marginal propensity to consume
- Marginal propensity to save
- Average propensity to consume
- Savings