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Question
State the meaning of the following:
Autonomous Consumption
Solution
Autonomous Consumption: Autonomous Consumption Expenditure refers to that portion of consumption expenditure that is independent of the level of the disposable income. That is, irrespective of the level of disposable income, there will be always certain consumption expenditure. At zero level of disposable income, when income is zero, then also there will be some consumption expenditure, as the consumer need to sustain their life. The consumer at a zero level of income finances his/her consumption expenditure by the way of borrowings. This part of consumption expenditure is symbolically denoted by capital `"C" (bar"C").`
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RELATED QUESTIONS
What is marginal propensity to consume? How is it related to marginal propensity to save?
Given the following data, find the missing value of 'Government Final Consumption Expenditure' and 'Mixed Income of Self Employed'.
| S.No. | Particulars | Amount (In ₹ crores) |
| (i) | National Income | 71,000 |
| (ii) | Gross Domestic Capital Formation | 10,000 |
| (iii) | Government Final Consumption Expenditure | ? |
| (iv) | Mixed Income of Self Employed | ? |
| (v) | Net Factor Income from Abroad | 1,000 |
| (vi) | Net Indirect Taxes | 2,000 |
| (vii) | Profits | 1,200 |
| (viii) | Wages & Salaries | 15,000 |
| (ix) | Net Exports | 5,000 |
| (x) | Private Final Consumption Expenditure | 40,000 |
| (xi) | Consumption of Fixed Capital | 3,000 |
| (xii) | Operating Surplus | 30,000 |
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Statement 2: Aggregate Demand curve and Consumption curve are parallel to each other.
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| Income (in ₹ crores) |
Savings (in ₹ crores) |
| 0 | -20 |
| 50 | -10 |
| 100 | 0 |
| 150 | 30 |
| 200 | 60 |
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At the break-even point level of incomes for the economy is ₹ 10,000 crores and if the people tends to save 20 per cent of their additional income, then calcualte the value of autonomous consumption.
If in an economy, the Investment Multiplier is 4 and Autonomous Consumption is ₹ 30 crore, the relevant consumption function would be ______.
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