Identify the maximum value of Marginal Propensity to Save :
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 1
Marginal propensity to save (MPS) is the change in saving per unit change in income.
MPS = ΔS / ΔY
Out of each extra rupee of income, a person may save nothing (MPS = 0). At most, the person saves the whole rupee (MPS = 1). Saving can never be more than the extra income. Also, the marginal propensity to consume (MPC) and MPS add up to 1, and MPC cannot be negative. So the maximum value of MPS is 1.
NCERT (2026-27): “4.1.1. Consumption …Now, let us look at the value that MPC can take. When income changes, change in consumption ( ΔC ) can never exceed the change in income ( ΔY) . The maximum value which c can take is 1. On the other hand consumer may choose not to change consumption even when income has changed. In this case MPC = 0. Generally, MPC lies between 0 and 1 (inclusive of both values).… …Savings is that part of income that is not consumed.… …Marginal propensity to save (MPS): it is the change in savings per unit change in income. It is denoted by s and is equal to 1 – c. It implies that s + c = 1.…” |