Read the following statements carefully:
Statement 1: A consumption function describes the relationship between consumption and savings.
Statement 2: Consumption function consists of two components---autonomous consumption and induced consumption.
In the light of the given statements, choose the correct alternative from the following:
Read the following statements carefully:
Statement 1: A consumption function describes the relationship between consumption and savings.
Statement 2: Consumption function consists of two components---autonomous consumption and induced consumption.
In the light of the given statements, choose the correct alternative from the following:
Show Hint
- Statement 1 is true and Statement 2 is false.
- Statement 1 is false and Statement 2 is true.
- Both Statements 1 and 2 are true.
- Both Statements 1 and 2 are false.
The Correct Option is B
Solution and Explanation
Step 1: Understanding the given statements.
Statement 1: This is false because the consumption function describes the relationship between consumption and income, not savings.
Statement 2: This is true because the consumption function consists of two components:
Autonomous Consumption: The minimum level of consumption that occurs even when income is zero.
Induced Consumption: The component of consumption that varies with changes in income.
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