When the consumption is changed as per the change in income level such consumption is known as:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Induced consumption
A family spends something on food and shelter even when it earns nothing; that part is autonomous consumption, C̄. The rest of its spending goes up when income rises and down when it falls: out of each extra rupee it spends a fraction c, the marginal propensity to consume. This part, cY, which changes as per the change in income level, is induced consumption.
Together the two make up the consumption function, C = C̄ + cY.
Why the other options are incorrect
Option (2) Autonomous consumption — Incorrect. Autonomous consumption is the opposite case: it stays the same whatever the level of income, and it is the consumption that takes place even at zero income.
Option (3) Effective consumption — Incorrect. There is no such part of the consumption function.
Option (4) Total consumption — Incorrect. Total consumption C is the sum of the two parts. Only its induced part changes with income; the autonomous part does not.
NCERT: Introductory Macroeconomics — Chapter 4: Determination of Income and Employment (2025-26)
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