Het break-evenpunt

The break-even point is when an individual’s total consumption matches their total disposable income. At this precise point, every dollar earned is spent—nothing is saved or borrowed.

Let’s consider Kevin. He earns a disposable income of $2,000 each month. If he spends exactly $2,000 on his monthly expenses, he’s operating at the break-even point. There’s no surplus to save, and no shortfall that requires borrowing.

This concept can be visualized on a graph that includes the consumption function. A 45-degree line drawn from the origin is a useful reference for comparing disposable income and consumption. This line represents all points where disposable income equals consumption. The break-even point appears where the consumption function intersects this 45-degree line.

Below the break-even point, consumption exceeds disposable income. This means Kevin is either borrowing money or using savings he accumulated in the past.

Above the break-even point, consumption is less than the disposable income. In this case, Kevin has surplus funds that he can save.

Precisely at the break-even point, there is neither borrowing nor saving.