Which of the following is NOT true?

1. The most important determinant of consumption demand is household income.
2. A consumption function describes the relation between autonomous consumption and income.
3. The simplest consumption function assumes that consumption changes at a constant rate as income changes.
4. Consumption function consists of two components autonomous consumption and induced consumption.
5. If consumption takes place even when income is zero, it is because of induced consumption.

2 and 5

The correct answer is Option 2: 2 and 5

1. The most important determinant of consumption demand is household income.This is correct.
   
2. A consumption function describes the relation between autonomous consumption and income. This is incorrect. A consumption function describes the relation between consumption and income (not between autonomous consumption and income.)
3. The simplest consumption function assumes that consumption changes at a constant rate as income changes. This is correct.
4. Consumption function consists of two components autonomous consumption and induced consumption. This is correct.
5. If consumption takes place even when income is zero, it is because of induced consumption. This is incorrect. If consumption takes place even when income is zero, it is because of autonomous consumption (not induced consumption).

"The most important determinant of consumption demand is household income. A consumption function describes the relation between consumption and income. The simplest consumption function assumes that consumption changes at a constant rate as income changes. Of course, even if income is zero, some consumption still takes place. Since this level of consumption is independent of income, it is called autonomous consumption.

We can describe this function as: C =  $\overline{C}+c.Y$

The above equation is called the consumption function. Here C is the consumption expenditure by households. This consists of two components autonomous consumption and induced consumption ( cY ). Autonomous consumption is denoted by  $\overline{C}$ and shows the consumption which is independent of income. If consumption takes place even when income is zero, it is because of autonomous consumption. The induced component of consumption, cY shows the dependence of consumption on income."