Final answer:
The marginal propensity to consume (MPC) is the share of additional income that is spent on consumption, while the marginal propensity to save (MPS) is the share of additional income that is saved.
Step-by-step explanation:
The marginal propensity to consume (MPC) is the share of additional income that a person decides to spend on consumption expenditures. The marginal propensity to save (MPS) is the share of additional income that a person decides to save. The formula for calculating the MPC is the change in consumption (ΔC) divided by the change in disposable income (ΔYD), while the formula for calculating the MPS is the change in savings (ΔS) divided by the change in disposable income (ΔYD).
For example, if the MPC is 0.9, it means that out of every additional dollar earned, 90% will be spent on consumption, and the MPS would be 0.1, indicating that 10% of the additional dollar will be saved.