Read the following statements -
Assertion (A) and Reason (R):
Assertion (A) Even if income is 0, some consumption still takes place.
Reason(R) Marginal propensity to consume is the change in consumption per unit change in income.
From the given alternatives choose the correct one:
Answer & explanation
Correct answer: option 2
Even if income is 0, some consumption still takes place. This is the autonomous consumption, which is independent of income. For example: basic necessities of life like food, clothing etc.
C = c + bY,
Here "c" is the autonomous consumption.