morning ma'am! just a small doubt, why can't mps be less than zero ?
Solution
We know that MPS refers to the ratio of change in savings to the change in disposable income. Now, MPS would be negative in case the change in savings due to the change in income is negative. However, this is not possible.
This can be understood as follows:
Saving = Income - Consumption
Change in saving = Change in income - change in consumption
A change in savings would be negative only when the change in consumption due to a change in income is negative. This is not possible because the change in consumption due to a change in income cannot be more than the change in income itself.
We know that MPS refers to the ratio of change in savings to the change in disposable income. Now, MPS would be negative in case the change in savings due to the change in income is negative. However, this is not possible.
This can be understood as follows:
Saving = Income - Consumption
Change in saving = Change in income - change in consumption
A change in savings would be negative only when the change in consumption due to a change in income is negative. This is not possible because the change in consumption due to a change in income cannot be more than the change in income itself.
