Question
Given saving curve, derive consumption curve and state the steps in doing so. Use diagram.
✓
Answer
Given saving curve SS',
- Draw a 45o line from the origin.
- Take QC equal to OS on the Y-axis.
- Draw a perpendicular line from B to B' on OX-axis which intersect 45o line at point B.
- Join C and B and extend it to get consumption curve CC'.
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