Question

Which of the following cannot have a negative value? Give reasons.
(i) Average propensity to save (iiI) Marginal propensity to save.

Answer 1

(i) APS refers to Average Propensity to save which defines the amount of savings in every 1 rupee of income for all level of income which can be less than zero at income levels which are lower than the break-even point.

(ii) Marginal Propensity to Save can be less than zero as it is percentage change in saving when there is some change in the level of income which cannot be more than the change in income.