State relationship between income and saving.

Relationship between income and saving.
(i) As income increases, saving also increases but the rate of increase in saving is more than the rate of increase in income after a particular level of income. This means that as income increases, the proportion of income saved increases (and the proportion of income consumed decreases).
(ii) At lower level of incomes, savings is negative. In the initial stages when there is no income or very low level of income, consumption expenditure is more than income leading to negative saving (i.e., dissaving). For instance, if income is, say र 5,000, and consumption expenditure is, say र 6,000, then saving will be र –1,000 (= 5,000 – 6,000), i.e., there is dissaving. Here average propensity to save is negative. APS = -1,000/5,000 = -0.2.
Propensity to save is of two types – Average Propensity to Save (APS) and Marginal Propensity to Save (MPS).