SAVING CONSUMPTION

40.         SAVING
CONSUMPTION
1.      Meaning
Saving is that part of income which is not spent on current consumption.

2.      Formula
S = Y-C, where S = Saving, Y =Income and C =
Consumption.

3.      Function
Savings is a function of income but depends on liquidity, preference, and rate of interest.

4.      Importance
Savings encourages investments and capital formation in the economy.

It refers to the expenditure incurred by the people to purchase goods and services to satisfy their various wants.

C = Y- S, where S = Saving, Y =Income and C= Consumption.


Consumption is a function of income, i.e. C = f (Y)



Consumption encourages further production of goods and services in the economy.