The graph shows a consumption function and the 45° line. At point B, A consumption line C = 40 + 0.75Y starting at ₹40 crore on the vertical axis, and a dashed 45° line from the origin. They cross at B, where income and consumption are both ₹160 crore. At K, income is ₹400 crore and consumption ₹340 crore.

The graph shows a consumption function and…

The graph shows a consumption function and the 45° line.

Question 12

MediumOriginal question

The graph shows a consumption function and the 45° line. At point B,

A consumption line C = 40 + 0.75Y starting at ₹40 crore on the vertical axis, and a dashed 45° line from the origin. They cross at B, where income and consumption are both ₹160 crore. At K, income is ₹400 crore and consumption ₹340 crore.

saving is at its maximumCorrect answerYour answerconsumption is zeroCorrect answerYour answerincome is zeroCorrect answerYour answersaving is zeroCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer D

Correct answer: D

B lies on the 45° line, where the value on the vertical axis equals the value on the horizontal axis: C = Y = ₹160 crore.
With all income consumed, saving is zero: B is the break-even point.

Concept: Break-even point
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsThe consumption function

Practise this chapter →

Ten questions from Aggregate Demand, Consumption & Saving, at your own pace.

Practise this chapter →

Ten questions from Aggregate Demand, Consumption & Saving, at your own pace.

The graph shows a consumption function and the 45° line.

Question 12

Explanation