Practicing Success
Identify the symbol that is used to denote autonomous consumption. |
$\overline{C}$ C $\Delta C$ MPC |
$\overline{C}$ |
C (Consumption Function)=$\overline{C}$ + 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 (c.Y). 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, c.Y shows the dependence of consumption on income. When income rises by Re 1. induced consumption rises by MPC i.e. c or the marginal propensity to consume. |