Question

Differentiate between an induced increase in consumption and an autonomous increase in consumption. How are they represented on a graph?

Answer 1

Induced Increase in Consumption means that as Disposable Disposable Increases, consumption also Increases because of Increase in Disposable Income. Thus, Increase in Consumption as a result of Increase in Disposable income is called induced Consumption.

This induced Increases in Consumption is represented as an expansion along the Consumption Curve as Disposable Income Increases on a graph.

Autonomous Consumption is that Consumption which is independent of the level of income. An autonomous Increase in Consumption means that Consumption which is independent of the level of income has increased.

Autonomous Increase in Consumption will be represented on a graph as an upward shift in the Consumption Curve.