NAME: ASHAOLU AYANFEOLUWA ELIZABETH

DEPARTMENT:ECONOMICS

MATRIC NUMBER: 20EA007773

COURSE: ECO 217 ASSIGNMENT GROUP 2

REG NUMBER: 2000148

DATE: 10TH OF JANUARY 2022

CONCEPT OF SAVINGS

The concept of saving is important in the context of economics and

finance. In general application, saving usually stands for depositing money
separately for a particular purpose, for instance investment in retirement plan or
depositing cash in the bank.
The income not spent on consumption is defined as saving. Saving is
the act of not consuming all of one’s current income. Whatever is not consumed
out of disposable income is by definition saving. The economy’s saving equation
is: Saving = Disposable Income – Consumption
According to personal finance concept, saving means keeping or
conserving money to be used in the future. Whereby usually the money is
deposited, instead of investing it, where a risk factor is always involved. Saving is
done with some per-determined investment objectives. In other words, saving is
the act of conserving cash for any purpose or for future usage.
In Keynesian economic analysis,savings represent the difference
between income and consumption. The reason is that income is either consumed or
saved. Thus Savings is therefore defined as the amount of income per time that is
not consumed by economic units. For the household it represent part of disposable
income not spent on domestically produced or imported goods and services. For
the firm,it represents undistributed business profit. Savings is however a flow
variable measured over a time.
What people save, avoiding to consume all their income, is called "personal
savings". These savings can remain on the bank accounts for future use or be
actively invested in houses, real estate, bonds, shares and other financial
instruments.
National savings are personal savings plus the business savings and public
savings. Business savings can be measured by the value of undistributed corporate
profits. Public savings are basically tax revenues less public expenditure
Methods of saving include putting money aside in, for example, a deposit
account, a pension account, an investment fund, or as cash. Saving also involves
reducing expenditures, such as recurring costs.
The Concept of Savings are
MPC:Marginal Propensity to Consume
APC:Average propensity to save
MPS:Marginal Propensity to Save
APC:Average Propensity to Consume

Marginal Propensity to Save:

This is defined as the ratio of change in income. It can be written as change
in savings/change in income. The value of MPS is greater than zero and less than
one. MPS +MPC=1

Average Propensity to Save:

This refers to the proportion of income that is devoted to Savings. It is the
fraction of income that is saved,it is expressed as the ratio of total savings to total
income,APS=S/Y where APS +APC=1

Marginal Propensity to Consume

It is the fraction of additional disposable income that is consumed. It is the
fraction of additional income used for consumption. The value of MPC determines
the multiplier. The slope of the consumption curve determined the MPC.MPC
=change in consumption/change in income. If MPC is 1 MPS is zero therefore
0<MPC<1

Average Propensity to Consume

This refers to the fraction of total income that is spent on consumption. It is
obtained by dividing total consumption expenditure by total income. It can be
written as APC=C/Y.. The APC decreases when the level of income increase. APC
ranges between zero and one. The level at which APC equals to one or C=Y is
called break even level of income.
 Differences between Saving and Savings

Saving differs from savings. The former refers to the act of not consuming
one's assets, whereas the latter refers to either multiple opportunities to reduce
costs; or one's assets in the form of cash. Saving refers to an activity occurring
over time, a flow variable, whereas savings refers to something that exists at any
one time, a stock variable.

There are several causes or reasons (motives) which induce people to save.
They can be grouped under two headings: (i) Power to save, (ii) Will to save.

REFERENCES:
Dell'Amore, Giordano (1983). "Household Propensity to Save", in Arnaldo Maurie (ed.), Mobilization of
Household Savings, a Tool for Development, Finafrica, Milan.