Question

Choose the correct answer:      

When income increases, the consumption expenditure _________.

(a) increases
(b) decreases
(c) becomes equal
(d) becomes zero

Answer 1

When income increases, the consumption expenditure increases.
Explanation:
Consumption expenditure refers to the total expenditure incurred by all the households in an economy on different types of goods and services in order to satisfy their wants. It shares a positive relationship with income, i.e., as income increases, the consumption expenditure also increases.