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Given a consumption curve, outline the steps required to be taken in deriving a saving curve from it. Use diagram.

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The process of deriving saving curve may be described as under : 

1. CC is a straight line consumption curve. 

2. Now we shall draw income curve from the point of origin which is 45° angled curve. 

Income (Y) = Consumption (C) + Saving (S) 

3. At zero level of income, there is an autonomous consumption of OC. The corresponding saving at this income level is (-)OC. The saving curve starts at (- )C. 

4. At the income level OB, where the 45° reference line intersects the consumption curve, C = Y. At this income level, saving is equal to zero. Thus, we get point B on the v-axis of the saving curve. 

5. By connecting (-)C and B, we get the saving curve. 

Following diagram shows the derivation of saving curve from straight line consumption curve :

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