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Question
Define or explain the following concept.
Induced Consumption expenditure.
Solution
Induced Consumption expenditure
Induced Consumption expenditure, refers to the expenditure directly related to the income. Higher the income, greater is the volume of consumption expenditure and lesser the income smaller is the volume of consumption expenditure
Induced Investment : It refers to the investment made by businessmen, industrialists and entrepreneurs in a private sector economy with the motive of profit. It is income elastic. That means such type of investment is directly or positively linked with profit. Changes in price level, interest fate, consumption pattern, changes in the level of income, possibility of high profit margins, savings, supply of money, availability of credit, etc., influence such type of investment, e.g., in India the investments made by the Tatas, Birlas, Kirloskars, Cummins Group, Maruti Udyhog Ltd. and also by many I.T. firms are generally induced investment.
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