Given saving curve, derive consumption curve and state the steps in doing so. Use diagram.
Outline the steps required to be taken in deriving the Consumption Curve from the given Saving Curve. Use Diagram.
In the diagram, the supply curve is given as the SS curve and `-barC` represents negative savings. At the breakeven Point B, we find that Y = C and S = O.
Derivation of the consumption curve from the saving curve:-
Given the SS curve, let us consider OS = OC. At Point B, draw a perpendicular 45° line towards Point A. Points C and A are joined to produce a straight line upward sloping consumption curve CC.
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