Question

When income increases, the consumption expenditure ______.

Options

• increases

• decreases

• becomes equal

• 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.