Question

Outline the steps required to be taken in deriving saving curve from the given consumption curve.

Answer 1

Steps-

(i) CC is the given consumption curve on Y axis. Take OS₁ equal to OC.

(ii) Draw a 45^o line from the point of origin. It intersects CC at B.

(iii) From point B draw a perpendicular on OX which cuts OX at B₁.

(iv) Join S₁ and B₁ by a straight line and extend it to S.

(v) SS₁ is the saving curve.