Draw on a diagram a straight line saving curve for an economy. From it derive a consumption curve explaining the method of derivation. Show a point on consumption curve at which APC is equal to 1.

In the adjoining Fig.(a). a straight line saving curve SS is drawn showing saving function at different levels of income. For example, at zero level of income, vertical distance OS shows dissaving (indicating autonomous consumption) whereas at OR level of income, there is zero saving, i.e., whole of income is spent on consumption. At point R, consumption = income. To the left of R, consumption is more than income and to the right of R, consumption is less than income. Since consumption + saving is always equal to income, it implies that consumption and saving curves representing consumption and saving functions are complementary. So we can derive directly consumption curve from saving curve keeping in mind that amount of saving/dissaving is the vertical distance between saving curve and X-axis.

At zero level of income, vertical distance of negative saving of OS is shown as consumption expenditure of OC which is equal to OS. Thus, point C is the starting point of consumption curve. Since at OR level of income saving is zero (at point R), it implies consumption expenditure is equal to income of OR. This enables us to plot OD as consumption expenditure equal to OR which, in turn, gives a point B on 45° line. Remember, 45° dotted line is called expenditure equals income line where each point shows expenditure equal to income. Thus point B becomes the point on consumption curve at which OD (or BR) = OR. By joining points C and B and extending it further, we get consumption curve.
B is the point on consumption curve at which total consumption expenditure (C) is equal to income (Y), i.e., C/Y = 1. In other words at point B, the APC (or C/Y) = 1.

Fig.(a)