Question
Your marginal propensity to save is equal to the change in _____________ divided by the change in _____________.
Step 1
To calculate the marginal propensity to save, we need to compare the change in savings to the change in income. Show more…
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In an economy, when income increases from $\$ 400$ billion to $\$ 500$ billion, consumption expenditure changes from $\$ 420$ billion to $\$ 500$ billion. Calculate the marginal propensity to consume, the change in saving, and the marginal propensity to save.
Marginal Propensity to Save Suppose $C(x)$ measures an economy's personal consumption expenditure and $x$ measures the personal income, both in billions of dollars. Then $S(x)=x-C(x) \quad$ Income-consumption measures the economy's savings corresponding to an income of $x$ billion dollars. Show that $$ \frac{d S}{d x}=1-\frac{d C}{d x} $$ The quantity $d S / d x$ is called the marginal propensity to save.
Differentiation
Marginal Functions in Economics
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