Meaning of Saving Function:
Saving is that part of income which is not spent on consumption. The relationship between saving and
income is called saving function.
If we Simply put, saving function (or propensity to save) relates the level of saving to the level of income
as It is the desire or tendency of the households to save at a given level of income. HERE IS THE
SYMBOLIC REPRESENTATION
S = f (Y)
SO WE CAN SEE THAT
(i) There is direct relationship between income and saving, i.e., if income increases, saving also
increases but by less than increase in income. It means as income increases, proportion of income saved
increases (because proportion of income consumed decreases).
(ii) At lower level of income, saving is negative. In the initial stages when there is very low level of
income, consumption expenditure is more than income leading to negative saving ForEXAMPLE , if
income is, say, Rs 5,000 and consumption expenditure is, say 6,000, then saving will be negative, i.e., –
1000 SO average propensity to save THAT IS SAVING FUNCTION WILL BE negative.