CBSE 2025, Compartment, Set 1

Question

On the basis of the given figure, answer the following questions:
![Consumption and Savings Curves](https://www.edvaya.com/images/cbse/economics/2025/cbse-2025-compartment-economics-consumption-savings-curve.webp)

(a) Identify AB and CD curves.
(b) Briefly discuss the reason for AB curve starting from point A (Y-intercept).
(c) State the significance of OY level of income.

Edvaya · Accepted Answer

The correct answer is Subjective. **(a) Identify AB and CD curves:** In the given figure, **AB** represents the **Consumption Curve** and **CD** represents the **Savings Curve**. **(b) Reason for AB curve starting from point A:** The consumption curve (AB) starts from point A on the positive Y-axis because it represents **Autonomous Consumption ($\bar{C}$)**. Autonomous consumption is the minimum level of consumption expenditure incurred by households for their survival even when their income is zero. It proves that consumption can never be zero. **(c) Significance of OY level of income:** At the OY level of income, the Savings Curve (CD) intersects the X-axis, meaning Savings are exactly zero ($S = 0$). This happens because the entire income is spent on consumption ($Y = C$). This specific point represents the **Break-even level of income** in the economy.

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Economics > Introductory Macroeconomics > Determination Of Income Employment

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