Saving Function

The saving function depicts the relationship between saving and income at various levels of income. The part of income which is not spend on consumptions is saved. Saving is thus equal to the difference between income and consumption. As we have stated earlier, consumption is a function of income. Saving being that part of income which is not consumed, is thus also a function of income. This relationship between saving and income is called saving function. Saving functions written as follows:

S = f(Y)

Where S denotes saving and f shows functional relationship S and Y. As has shown in the schedule of consumption function, as the income increases consumption becomes less than the income, thereby giving rise to savings. Therefore with an increase in the level of income amount of saving keeps on increasing.