Meaning: - The
saving function is also called as propensity to save. The saving function is
the counterpart (matching part) of the consumption function. The amount of
saving at any level of income is equal to the difference between the income and
consumption expenditure. It can be expressed as follows:
S = Y – C
The
relationship between income and saving is shown in
the diagram.
In the above diagram, ‘SS’
curve is the saving curve, which is the counterpoint of consumption curve ‘CC’.
At ‘ON’ level of income,
consumption equals income at point ‘B’ and the savings is zero. When income is
lower than ‘ON’, consumption is greater than income and there is dis-saving because consumption
is done through borrowing. So saving curve ‘SS’ is below ‘OX’ –axis. When
income is greater than ‘ON’, the consumption is lower than income and there is
savings. So, saving curve ‘SS’ is above OX-axis.the propensity to save depends
on the level of income. The relationship between savings and income is direct
and positive.
Normally,
higher the income, higher would be the saving. Therefore, saving is the
function of income. It can be expressed as follows:
S=f
(Y)
Saving
Schedule
The
relationship between income and saving can be shown in the following schedule.
Saving
Schedule (Rs. Crore)
|
Income (Y)
|
Consumption (C)
|
Savings (S)
|
|
10000
15000
20000
25000
30000
|
13000
15000
17000
19000
21000
|
-3000
Zero
3000
6000
9000
|
From the above schedule, it
is clear that there is direct and positive relationship between income and
saving. As the income increases, savings also increase depending upon the
consumption expenditure.
