Question

What is the break-even point in the consumption function?

Options

• The point where saving is maximum.

• The point where income equals zero.

• The point where income equals consumption and saving is zero.

• The point where consumption is greater than income.

Answer 1

The point where income equals consumption and saving is zero.

Explanation:

At the break-even point, the entire income is spent on consumption, leaving no room for saving (S = 0). On a diagram, this is where the consumption curve (C) intersects the 45° line (Y = C).