Marginal propensity to Consume (MPC) is defined as the ration of change in consumption to change in income. `MPC=(DeltaC)/(DeltaY)`
The value of MPC always lies betweeen 0 and 1, i.e. `0 lt MPC le 1`. Marginal propensity to Save (MPS) is the ratio of change in savings to change in income. `MPS=(DeltaS)/(DeltaY)`
Relationship between MPC and MPS : The sum of the MPC and MPS is always equal to one or MPC+MPS=1
The relationship is derived as follows:
We have Y=C+S
or `DeltaY=DeltaS`
Dividing both sides by `DeltaY`, we have
`(DeltaY)/(DeltaY)=(DeltaC)/(DeltaY)+(DeltaS)/(DeltaY)`
or MPC+MPS=1
or MPC=1-MPS
MPS=-1MPC
The value of MPS depends on the value of MPC. If MPC=0.70, then MPS=0.30
