Effect of an Autonomous Change on Equilibrium Demand in Product Market Video Lecture | Economics CUET Preparation - Commerce

we can illustrate this consumption
function as a graph the horizontal axis
reflects the level of income Y and the
vertical axis consumption spending si
autonomous consumption C bar is that
part of consumption spending that is
independent of the level of income we've
seen that even if incomes 0 some
consumption spending still takes place
and this is why in this graph or
timeless consumption spending starts at
a point on the vertical axis above 0 a
change in autonomous consumption
spending changes this vertical intercept
for instance an increase in household
wealth a note I say wealth not income
perhaps because a good investment is
paid off for an inheritance has come
through will cause that household to
increase their autonomous spending
pattern this is indicated by a higher
vertical intercept now we know there's a
positive relationship between income and
consumption spending as income increases
so does consumption spending and this
must mean an upward sloping curve an
increase in income for instance from y1
to y2 indicates that consumption
spending increases from c1 to c2 but
because the marginal propensity to
consume is less than 1 the increase in
consumption spending from c1 to c2 is
smaller than the change from y1 to y2
the slope or angle of the curve is
determined by the marginal propensity to
consume it's equal to the change in C
divided by a change in y i've income
rises by a hundred and the resulting
change in consumption spending is 75 the
marginal propensity to consume is 75
divided by a hundred which is naught
point seven five this means that for
every one round rise in income
consumption spending goes up by 75 cents
and twenty five cents is saved the value
decides the slope of the line
you