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Why does consumption curve not start from the origin ? |
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Answer» Consumption is an activity of using goods and services by the people to satisfy human wants. Consumption has two components : 1. Autonomous consumption – Autonomous consumption is the consumption which is independent of the level of income. Such expenditure is incurred even if income is zero. 2. Induced consumption – Induced consumption is the consumption which is influenced by the level of income. Such consumption bears a positive relation with the level of income. Thus, C = C + bY Since autonomous consumption is incurred without having any income, consumption expenditure will always be positive and cannot be zero because survival needs consumption. Hence, consumption curve will not start from the origin i.e., from zero |
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