The graph shows two consumption functions, C₁ and C₂. The move from C₁ to C₂ is caused by Two parallel consumption lines: C₁ starts at ₹40 crore and C₂ at ₹80 crore on the vertical axis, with the same slope of 0.75. An arrow points up from C₁ to C₂.

The graph shows two consumption functions,…

The graph shows two consumption functions, C₁ and C₂.

Question 15

MediumOriginal question

The graph shows two consumption functions, C₁ and C₂. The move from C₁ to C₂ is caused by

a rise in the MPCCorrect answerYour answera rise in incomeCorrect answerYour answera rise in autonomous consumption with the MPC unchangedCorrect answerYour answera fall in autonomous consumptionCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

The lines are parallel, so the slope (MPC) is the same.
C₂ starts higher, at ₹80 crore instead of ₹40 crore: autonomous consumption has risen.

Worth noting

A rise in income is a movement along one line, not a shift to another.

Concept: Shift of the consumption function
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsThe consumption function

Practise this chapter →

Ten questions from Aggregate Demand, Consumption & Saving, at your own pace.

Practise this chapter →

Ten questions from Aggregate Demand, Consumption & Saving, at your own pace.

The graph shows two consumption functions, C₁ and C₂.

Question 15

Explanation