Q.Distinguish between Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS).

MPC and MPS describe how an extra rupee of income is divided between spending and saving, and together they always sum to one.

The Marginal Propensity to Consume (MPC) is the fraction of an additional unit of income that a household spends on consumption, given by $MPC = \dfrac{\Delta C}{\Delta Y}$. The Marginal Propensity to Save (MPS) is the fraction of that additional income which is instead saved, given by $MPS = \dfrac{\Delta S}{\Delta Y}$.

Since every extra rupee of income is, by definition, either consumed or saved, the two propensities are complementary:

$MPC + MPS = 1$

A high MPC means households spend most of any extra income (a small leakage into saving), which — through the multiplier $k = 1/(1-MPC) = 1/MPS$ — produces a larger multiplier and a bigger eventual rise in national income for a given increase in autonomous investment or government spending. A high MPS has the opposite effect, dampening the multiplier.

A frequent error is confusing the marginal propensities (which relate to a change in income) with the average propensities to consume/save (which relate to the total level of income, APC = C/Y and APS = S/Y) — these need not sum neatly in the same simple way at every income level and are conceptually distinct.