Assertion (A): If the APC of an economy is 0.7, its APS is 0.3.
Reason (R): The APS is the change in savings per unit change in income.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A) is true but (R) is false.
Assertion (A): If the APC of an economy is 0.7, its APS is 0.3. — True. Income is consumed or saved, so C / Y + S / Y = 1, that is APC + APS = 1. APS = 1 − 0.7 = 0.3.
Reason (R): The APS is the change in savings per unit change in income. — False. The APS is the savings per unit of income, S / Y.
The APS and the MPS are different: the APS divides total saving by total income, while the MPS divides a change in saving by a change in income.
NCERT (2026-27): “Some Definitions 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. |