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

In the given diagram the consumption curve is given by

Where

C = autonomous consumption

Y = income

B = the rate at which consumption increases with increase in income

The aggregate supply curve is at 45 degree

Consumption is equal to Income at point E

Derivation of saving function from consumption function

S is the saving function

Where

Negative savings = autonomous consumption at Y = 0

This is shown on the negative axis in the lower panel

At point S here all the income is spent on consumption expenditure and the saving is 0, which is shown as breakeven point S after this point S and Y are joined to have a straight line sloping curve.