Question

“Saving curve can be derived from the consumption curve” Justify the statement, citing valid steps with the help of a well-labelled diagram.

For Visually Impaired Candidates: 

“Saving curve can be derived from the consumption curve” Justify the statement, citing valid steps.

Answer 1

Given consumption curve (C) intersecting 45o line at B (Break-even level of income). Steps for derivation of saving curve from the consumption curve are as follows: 

1. Take OA on the negative intercept on Y-axis equals to OC (Autonomous consumption) having positive intercept on Y-axis, as a starting point of the saving curve. 

2. Draw a perpendicular from point B (where, Y=C) intersecting the X-axis at B’ (where S=0) which is another point on the saving curve. 

3. Join point A to point B’ extending the line till point S to get the saving curve (AS).

For Visually Impaired Candidates:

Given consumption curve (C) intersecting 45o line at B (Break-even level of income). Steps for derivation of saving curve from the consumption curve are as follows: 

1. Take OA on the negative intercept on Y-axis equals to OC (Autonomous consumption) having positive intercept on Y-axis, as a starting point of the saving curve. 

2. Draw a perpendicular from point B (where, Y=C) intersecting the X-axis at B’ (where S=0) which is another point on the saving curve. 

3. Join point A to point B’ extending the line till point S to get the saving curve (AS).