Meaning of Saving.<\/strong> Saving Function<\/strong> Technical Attributes of Saving Function<\/strong> (2) Marginal Propensity to Save (MPS):<\/strong> Relationship Between APC and MPC, APS and MPS<\/strong> Linear saving function<\/strong> Types of Saving<\/strong> You may also like:\u00a0Measure to Raise Propensity to Consume\u00a0<\/a><\/p>\n <\/p>\n
\nSaving is defined as the excess of income over consumption expenditure. Various economists have defined saving in different ways.
\nRobertson defines, “Current saving is a function of past income. It is the difference between yesterday’s income and today’s consumption.”<\/p>\n
\nSaving function establishes a functional relationship between income (as an independent variable) and saving (as a dependent variable). It shows how saving varies with a given change in income. in other words, it shows a schedule showing various amounts of saving corresponding to the different levels of income.
\nMathematically,
\nS=f(Y)
\nwhere.
\nS= saving, f= function and Y= income.<\/p>\n
\nIt has the following technical attributes of saving function.
\n(1) Average Propensity to Save (APS):<\/strong>
\nThe average propensity to save refers to the ratio of total savings to a given level of total income. Symbolically, APS = S\u00f7Y.<\/p>\n
\nThe marginal propensity to save is the complement of the marginal propensity to consume so that MPC + MPS =1. The marginal propensity to save is expressed as the ratio of a small change in saving to a small change in income (MPS = \u2206S\u00f7\u2206Y).<\/p>\n
\n\u2022 Short-run consumption function is considered as non-proportional consumption function. Hence, APC>MPC at all levels of income, but APS<MPS.
\n\u2022 Since, APC+APS=1. This expression implies that if APC decreases steadily as disposable income increases APS must increase steadily as income rises.
\n\u2022 If autonomous consumption is zero, all values, i.e. APC, MPC, APS, and MPS remain constant, positive and less than one.<\/p>\n
\nIf the slope of the saving curve remains constant throughout its length, then it is called linear saving function. It can be derived as linear from with the help of linear consumption function.
\nSince S=Y-C
\nor, S= Y-(a+bY)
\nor, S=Y-a+bY
\nwhere,
\nS= saving
\n-a=Y- intercept or autonomous saving,
\n1-b= marginal propensity to save,
\nY= total disposable income.<\/p>\n
\nSaving can be classified into the following groups:
\n1. Personal Saving: Saving made by individuals for their own personal reasons.
\n2. Corporate Saving: Saving made by companies as a form of retained earnings and depreciation.
\n3. Government Saving: It is the difference between net government receipts minus government consumption expenditure.
\n4. Forced Saving: Forced saving which occurs in mild inflation because it will bring about a reduction in the demand for consumer goods.<\/p>\n