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The following equation reveals how income, consumption, and saving are related:

Y = C + S

What is consumed cannot be saved, and what is saved cannot be consumed. Income is distributed between these two.

The consumption schedule gives the dependence relation of consumption on the level of income. Thus, it represents income on the x-axis and consumption on the y-axis, as shown below:

The 450line represents income. When income is zero or very low, consumption exceeds the income. As income increases, consumption also increases.

When income becomes equal to consumption, it is called the breakeven point. When income increases beyond the breakeven point, income increases in small proportion to income.

The saving schedule gives the dependence relation of saving on the level of income. Thus, it represents income on the x-axis and saving on the y-axis, as shown below:

When income is less than the breakeven point, saving is less than zero. Economists refer to it as dissaving. When income is less than the breakeven point, people either exhaust their previous savings or borrow the income. As income increases beyond the breakeven point, the savings increase.

In consumption and saving schedules, none of the variables is inversely related to income. As income increases, consumption and savings also increase. Therefore, the consumption and saving schedules are positively sloped straight lines, as shown in the above graphs.

Moreover, when income reaches a very high level, consumption increases at a diminishing rate because the wants are already satisfied. People spend less on consumption and save more. Therefore, consumption and saving show a direct (positive) relationship at a very high-level income.

Consumption and saving both are dependent on the level of income. The higher the income, the greater the value of these variables. The national income and per capita income of the US have increased over the years. As a result, the consumption and savings rates are higher than before.