What is mps in economics?

MPS, or Marginal Propensity to Save, is a concept in economics that refers to the proportion of additional income that a consumer saves rather than spends on consumption. It is calculated as the change in saving divided by the change in income.

MPS is an important indicator of consumer behavior and helps economists understand how changes in income levels affect savings behavior. A high MPS means that consumers are more likely to save rather than spend any additional income, while a low MPS indicates that consumers are more likely to spend rather than save.

MPS is often used in macroeconomic models to predict how changes in income levels will affect overall spending in an economy. By understanding how consumers allocate their income between saving and consumption, policymakers can better design policies to promote economic growth and stability.

Overall, MPS is a key concept in understanding how individuals and households make decisions about their finances and how these decisions impact the broader economy.