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Question
What is meant by autonomous consumption expenditure? Show it on a diagram.
Solution
The minimum amount of consumption possible, independent of income level, is known as autonomous consumption expenditure. It is the non-income component of consumer expenditure; hence, variables like wealth, expectations and borrowings can affect it.
On a consumption curve diagram, this is evident when the consumption line intercepts the vertical axis above the origin. The consumption function curve never starts at zero, as even at a zero level of income, some consumption is involved.
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RELATED QUESTIONS
Calculate investment expenditure from the following data about an economy which is in equilibrium:
National income = 1000
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Complete the following table:
|
Consumption expenditure (Rs) |
Savings (Rs) |
Income (Rs) |
Marginal propensity to Consume |
|
100 |
50 |
150 |
|
|
175 |
75 |
……. |
…… |
|
250 |
100 |
……. |
…… |
|
325 |
125 |
……. |
…… |
Define or explain the following concept.
Autonomous Consumption.
State whether the following statements are True or False with reasons:
Increase in consumption expenditure is less than increase in income.
Write short note on:
Paradox of value
Answer the following question.
What is meant by autonomous consumption? Explain with the help of a diagram.
Calculate the change in final income, if Marginal Propensity to Consume (MPC) is 0.8 and change in initial investment is ₹ 1,000 crores.
Calculate equilibrium level of income for a hypothetical economy, for which it is given that:
- Autonomous Investments = ₹ 500 crores, and
- Consumption function, C = 100 + 0.80Y
______ buy goods and services for consumption and also supply factors of production.
If MPC is less than one, it follows that ______
If MPS = 0, the value of multiplier will be ______
When we add up utility derived from consumption of all the units of the commodities, we get:
Income rises from ₹50,000 to ₹60,000, consumption increases from ₹40,000 to ₹48,000. In this situation, what will be the value of Marginal Propensity to Consume (MPC)?
Assertion (A): At the break-even level of income, the value of Average Propensity to Consume (APC) is zero.
Reason (R): Sum of Average Propensity to Consume (APC) and Average Propensity to Save (APS) is always equal to one.
The value of ______ can be greater than one.
