CBSE 2016 Class 12 Economics Delhi Set-1
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Question : 15 of 18
Marks:
+1,
-0
Given Consumption curve, derive saving curve and state the steps taken in the process of derivation. Use diagram.
Solution:
Consumption + saving is always equal to income because income is either consumed or saved. It implies that consumption and saving curves representing consumption and saving functions are complementary curves.
In part curve shows consumption function whereas line represents income. curve intersects line at point at which i.e.,.consumption = income. Point is the break even point showing zero saving. It states that saving curve must intersect -axis at the same income level where consumption curve and line intersects. Left of point B is negative saving and to the right of point is positive saving.
In part , we derive saving function in the form of saving curve. In part , the amount of saving is the vertical distance between curve and line. By plotting, the vertical distances of saving/dissaving and by joining them, we derive a saving curve. In part the vertical distance (dissaving) is plotted as below -axis in part-B. At OR level of income in Part A, vertical distance at point is shown as point on -axis in lower part of figure is nil. LM of part is shown as in part-B. By joining points and in lower segment, we get saving curve. Thus saving curve is derived from consumption curve.
In part curve shows consumption function whereas line represents income. curve intersects line at point at which i.e.,.consumption = income. Point is the break even point showing zero saving. It states that saving curve must intersect -axis at the same income level where consumption curve and line intersects. Left of point B is negative saving and to the right of point is positive saving.
In part , we derive saving function in the form of saving curve. In part , the amount of saving is the vertical distance between curve and line. By plotting, the vertical distances of saving/dissaving and by joining them, we derive a saving curve. In part the vertical distance (dissaving) is plotted as below -axis in part-B. At OR level of income in Part A, vertical distance at point is shown as point on -axis in lower part of figure is nil. LM of part is shown as in part-B. By joining points and in lower segment, we get saving curve. Thus saving curve is derived from consumption curve.
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