MPS is short for marginal propensity to save.
Marginal propensity to save is the proportion of an increase in income that gets saved instead of spent on consumption. MPS varies by income level.
Formula to calculate MPS.
Suppose a person’s salary was increased by $ 5,000 and because of this, she started to save $ 100 more. Calculate the person’s marginal propensity to save.
Therefore, the person’s MPS is 0.02.