Question

What is meant by autonomous consumption expenditure? Show it on a diagram.

Answer 1

The minimum amount of consumption possible, independent of income level, is known as autonomous consumption expenditure. It is the non-income component of consumer expenditure; hence, variables like wealth, expectations and borrowings can affect it.

On a consumption curve diagram, this is evident when the consumption line intercepts the vertical axis above the origin. The consumption function curve never starts at zero, as even at a zero level of income, some consumption is involved.