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Determination of Income and Employment — Economics STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceEconomicsDetermination of Income and Employment3 Marks
Question
Define average propensity to save and marginal propensity to save. Can the value of average propensity to save be negative? Give reasons for your answer.
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Answer

Average propensity to save is the ratio of total savings and total income. Marginal propensity to save is the ratio of increased savings (out of increased income) and increased income.Yes, value of average propensity to save can be negative when at very low level of income, consumption expenditure exceeds income, and there is dissaving, so savings are negative and APS is negative.

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