Final answer:
The marginal propensity to save (MPS) is calculated by dividing the amount saved by the total income received. In the example, the MPS is 0.25, indicating that the student saves 25 cents out of every dollar received.
Step-by-step explanation:
The marginal propensity to save (MPS) is the portion of additional income that a person decides to save rather than spend on consumption. According to the formula MPC + MPS = 1, where MPC stands for marginal propensity to consume, we can calculate MPS if we know how much is spent and saved.
In the given example, the student receives $100, spends $75 on a smartphone, and saves the remaining $25. To find the MPS, we divide the savings by the total amount received:
MPS = Savings / Total income
MPS = $25 / $100
MPS = 0.25
Therefore, the student's marginal propensity to save is 0.25, which means that for every dollar the student receives, they would save 25 cents.