Explain the meaning of the break-even point. Illustrate the concept.

Answer»

Break-even point refers to that point in the level of income at which consumption expenditure becomes exactly equal to income and there is no saving. In other words, whole of income is spent on consumption and as a result, there is no saving.

It happens when income increases from low level to high level, it becomes equal to consumption expenditure at some level and that level is called break even point. Below this level of income, consumption is greater than income but above this level, income is greater than consumption.

This concept can be illustrated as follows. A hypothetical consumption and saving schedule is given.

Income	Consumption	Saving
4000	4600	-600
5000	5300	-300
6000	6000	0
7000	6700	300
8000	7400	600

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