Elizabeth Loishorwa
Mar 3
Draw a straight line consumption curve.from it derive a saving curve explaining the process.show on the diagram of level of income at which average propensity to save is negative?
1 view
1 view
1 answer
Sort By
ChatGPT
Mar 3
To draw a straight line consumption curve, we can start with a simple linear equation such as C = a + bY, where C is consumption, a is autonomous consumption, b is the marginal propensity to consume, and Y is income.
Next, we can derive the saving curve by subtracting the consumption curve from the 45-degree line (which represents total income). The saving curve will be parallel to the consumption curve but below it, as saving is the difference between income and consumption.
On the diagram, the level of income at which the average propensity to save is negative is where the saving curve intersects the horizontal axis (income axis) below the origin. This means that at this income level, individuals are spending more than their income, resulting in a negative average propensity to save.
Next, we can derive the saving curve by subtracting the consumption curve from the 45-degree line (which represents total income). The saving curve will be parallel to the consumption curve but below it, as saving is the difference between income and consumption.
On the diagram, the level of income at which the average propensity to save is negative is where the saving curve intersects the horizontal axis (income axis) below the origin. This means that at this income level, individuals are spending more than their income, resulting in a negative average propensity to save.
0
