12th Class Economics Solved Paper - Economics 2016 Delhi Set-I

  • question_answer
    Given Consumption curve, derive saving curve and state the steps taken in the process of derivation. Use diagram.

    Answer:

    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 A, CC curve shows consumption function whereas \[{{45}^{o}}\] line represents income. C curve intersects \[{{45}^{o}}\] line at point B at which BR = OR i.e.., consumption = income. Point B is the breakeven point showing zero saving. It states that saving curve must intersect X-axis at the same income level where consumption curve and \[{{45}^{o}}\] line intersects. Left of point B is negative saving and to the right of point B is positive saving.
                In part B, we derive saving function in the form of saving curve. In part A, the amount of saving is the vertical distance between C curve and \[{{45}^{o}}\] line. By plotting, the vertical distances of saving /dis saving and by joining them, we derive a saving curve. In part A the vertical distance OC (dissaving) is plotted as \[O{{S}_{1}}\] below X-axis in part-B. At OR level of income in Part A, vertical distance at point B is shown as point \[{{B}_{1}}\] on X-axis in lower part of figure is nil. LM of part A is shown as \[{{L}_{1}}{{M}_{1}}\] in part ?B. By joining points S, \[{{B}_{1}}\] and \[{{L}_{1}}\] in lower segment, we get saving curve. Thus saving curve is I derived from consumption curve.
    PART-A
    PART?B


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