Ultimate propensity to save: definition, formula. Cash income of the population

Every person accumulates something. As a rule, for today it is money. In the people it is called "postponed for a rainy day." We can keep cash at home under the mattress, and we can put them on deposit to the bank. In any case, if the salary allows, some part of it is not worth spending. In theory, this is called the "marginal propensity to save." For the first time it was investigated in his works by JM Keynes. We will try to understand how this indicator will help us in today's crisis.

Psychological dependence

Let's digress a little from the theory and reflect on why a person is inclined to saving. In order to be able to accumulate something, two conditions must be met: first, all priority needs are met, the second - the amount of income allows you to save a certain amount.

Concepts such as consumption and saving are very close. They do not mean the same thing, but when you study the propensity to accumulate, you need to understand that they are very closely dependent on each other.

As early as the beginning of the 20th century, at the dawn of the birth of economic theory, it became necessary to study the relationship between consumption and saving. The first person to take up this business was, of course, Keynes. His theory is called "The basic psychological law." And that's what it says.

First, the savings of the population depend on income. A certain percentage, say 5% of income, a person is able to postpone for the future. If the income grows, this percentage will change insignificantly. It would seem a paradox. But then the psychology of man comes into force. The more we get, the more we spend. And the savings are no longer a larger amount. And if the growth of consumption grows in proportion to income, then the growth of savings will crawl very very slowly.

Evidence

The assertion that consumption grows as income grows is very simple proof. Take, for example, a family with an income of 6,000 rubles. 2% of the amount they postpone, and all other money goes to various expenses. What can I afford for this money? Pay communal payments, buy a minimum set of products and, probably, everything.

The income of the family starts to grow. Already the total contribution is 10,000 rubles. Now you can buy more meat, go to the movies one day and afford to buy a new dress. But the amount put aside for savings will still remain the same. Because first of all the person will satisfy the requirements, and only then to reflect on size of accumulation.

Factors affecting the change in consumption and savings

The growth or decline in consumption and savings depends not only on the growth of wages. In the economic environment, there are many other indicators that will somehow change the consumer ability. From these factors, the marginal propensity to save also depends.

1. Inflation . The growth of inflation is usually much higher than the indexation of wages. As a rule, prices increase monthly, while family incomes grow at most once a year. Therefore, the consumer has to spend a large amount on purchases, while there is no money left to save money.
2. Tax increase. Increase of deductions leads to a proportional reduction of any expenses, and propensity to accumulate including.
3. Price increase. This factor will significantly affect those households that have a low level of income. Those who receive a high salary, will postpone as much.
4. Growth of social insurance fees. This is a very interesting factor. Most often, a propensity to save arises when a person feels insecure from the state. Money is needed in case of illness, sudden death, etc. If this will all provide the insurance fund, then the need for individual savings will disappear. Therefore, as the increase in social allocations increases, the propensity to save falls.
5. Growth of offers on the market. This is purely a marketing factor. Usually, excitement is observed on drugs during periods of sudden emergence of epidemics, pandemics, etc. With increasing consumption, savings are declining.
6. Growth of incomes. As already discussed, with the increase in the amount of funds, consumption and saving tend to increase.

Theory

In the economic environment, it is customarily understood by savings to mean a certain amount of money, deferred from income for the future and not consumed at the moment. Propensity to accumulation can be average and limiting.

The average propensity to save displays what percentage of the total amount a person is ready to put off for the future, and is displayed in the form of a formula:

APS = S / Y, where S is the savings part, and Y is the total revenue.

The marginal propensity to save (formula) shows the changes in the savings part and in the amount of income. In other words, this indicator can tell how the people's desire to save or not their earned money will change if the amount of total income changes:

MPS = δS / δY.

With the increase in savings, costs are reduced. The economic significance of this indicator at the country level means the desire to save money, which means that there is an opportunity to invest it in real production. And this is investment, which, in turn, affects the overall welfare of the country.

A plot of propensity to save

The magnitude of the marginal propensity to save, as we have already explained, is highly dependent on consumption. The graph shows the actual dependence of one indicator on another. Consider the figure.

On the ordinate axis, the amount of income is assumed to be considered, and the abscissa is the amount of savings. If in theory all spent the amount equal to the income, then the dependence would be an ideal straight line, located at an angle of 45 °. This line denotes the line AB. But in real life this does not happen.

The direct line that reflects the propensity to save is indicated in the figure by the blue line, and it always deviates downward. The intersection point O is the zero saving point. It means that the household spends all the profit it earns for its own needs. Below this intersection, a debt arises, and above - savings. As you can see, the higher the incomes, the greater the marginal propensity to save.

Dependence of savings on age

In the course of our life we earn money unevenly. In one period of their life they are not enough, in another there are surpluses. This trend can also be depicted graphically.

Let the vertical axis will be income, and on the horizontal - the age. The curve shows that personal savings increase with the years, while in their youth there are almost no. And indeed it is.

While a person studies and is at the stage of finding his profession, his incomes are not great. Most of it he spends on training or personal needs. Becoming older and starting a family, he again begins to increase spending, but, as a rule, stable earnings are already being established by this time and it becomes necessary to postpone even a small amount for large purchases (car, house, children's education). The highest salary a person receives in adulthood, and then he begins to think about a pension about saving some of his money. It is during this period that the marginal propensity to save reaches its maximum, and then again declines.

What else affects the level of savings

There are certain non-income factors that also have a significant impact on a person's ability to save money for the future.

The first factor is waiting. If there is a crisis situation in the country, and a person expects that prices will soon rise and fees for services increase, then it will be stockpiled if possible now, at lower prices. Fear of empty shelves and huge expenses make people spend all the money here and now. But in the reverse situation, when in the future prices are expected to fall or at least their level, the person will postpone more than spend.

The second factor is consumer debt. We live in a world of loans. And now there is a trend that all the savings of the population simply turn into a fee for goods or services in future periods. The level of average wages is not enough to postpone anything to a major purchase. You can save 10 years for a car, but you can take it on credit and then pay 10 years for it. Thus, our desire and ability to accumulate something become a powerful tool of the economy - credit.

Propensity to save in macroeconomics

The concept of savings is very important not only for individual households, but for the country as a whole. The extreme propensity to save shows whether the people within the state can ensure development and production growth. It would seem that a simple indicator can?

In fact, the higher its value, the more free money there is in the hands of individuals and legal entities, which means that they act as potential investors. Investments are monetary investments in the sphere of production, and at the same time a powerful instrument of influence on the development of the country. The more money invested in innovation, technological innovations, etc., the higher the indicators of economic growth.

Conclusion

The propensity to save is one of the most important economic indicators that can be studied not only at the level of individual households, but also across the country as a whole. The higher this indicator, the better the people live.