MPS is the amount that savings will increase (or decrease) for every increase (or decrease) in disposable income.
When income increases, those who benefit from it have a choice to either save or spend. If they save (instead of spend) 40% of their increase in income, their MPS would be 0.4 (and their MPC, marginal propensity to consume, would be 0.6).
Marginal Propensity to Save = Change in Savings / Change in Income
Change in savings is $600 and change in income is $1500.
MPS = $600 / $1500 = 0.4
Therefore, MPS is 0.4.
- Wikipedia – Marginal Propensity to Save – An overview of marginal propensity to save including formulas.
- Houston Chronicle – The Relationship Between Marginal Propensity to Consume & Marginal Propensity to Save – A short article how MPC and MPS are linked.
- ACDCLeadership (YouTube) – Macro 3.9 – Multiplier Effect, MPC, and MPS (Macroeconomics) – A video describing the Marginal Propensity to Save.