Question

show the MPC + MPS = 1​

Answer 1

Since MPS is measured as ratio of change in savings to change in income, its value lies between 0 and 1. Also, marginal propensity to save is opposite of marginal propensity to consume. Mathematically, in a closed economy, MPS + MPC = 1, since an increase in one unit of income will be either consumed or saved.

Answer 2

Answer:

MPC + MPS = 1 , Justification is given

Explanation:

We need to the sum of MPC and MPS is equal to unity or one (i.e MPC + MPS = 1).

We take an example, suppose a man’s income Increases by Rs 1. If out of it, he spends 8 paise on consumption (i.e., MPC = 0.8) and saves 20 paise (i.e., MPS = 0.2) then MPC + MPS = 0.8 + 0.2 = 1.

 MPC + MPS = I as proved below. We know that income (Y) is either spent on consumption (C) or saved (S).

We know that,

MPC=ΔC / ΔY , and MPS=ΔS /ΔY

We also know that,

ΔY=ΔC + ΔS

So,

MPC+MPS=ΔC /ΔY + ΔS / ΔY

=ΔC+ ΔS / ΔY =ΔY/ΔY =1

Or, we can write it as

MPC+MPS=1, Hence the, sum of MPC and MPS is equal to

.